PROPOSED RULES
Original Notice.
Preproposal statement of inquiry was filed as WSR 99-22-070.
Title of Rule: Chapter 16-237 WAC, Commodity storage warehouses and grain dealers.
Purpose: This rule provides for standard requirements that commodity storage warehouses and grain dealers must meet to maintain their licenses. As required by the governor's executive order on regulatory improvement and agency policy, the proposed rule is updated and rewritten in a clear and usable format. Three existing chapters of rules will be repealed and the significant language in those chapters is revised into one new proposed chapter of rules for the warehouse audit program.
Statutory Authority for Adoption: RCW 22.09.020(13).
Statute Being Implemented: Chapter 22.09 RCW.
Summary: This rule establishes the minimum standard requirements for licensing, bonding and recordkeeping of warehouse operators and grain dealers. This proposed rule consolidates three chapters into one and aligns the rule with the policies and practices of licensed commodity warehouses and grain dealers.
Reasons Supporting Proposal: Current rules affecting commodity storage warehouses and grain dealers are found in three separate chapters of rule. This proposal combines the essence of those rules into one rule chapter and updates the language into a clear and usable format reflecting the standards and practices that must be met within the industry.
Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Don Michelbook, 617 North Fancher Road, Building 103/D, Spokane, WA 99212, (509) 533-2488.
Name of Proponent:
Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: This rule revision was developed in conjunction with an industry advisory board prior to publication in the register.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: The rule adopts requirements for licensing, bonding, net worth and recordkeeping that must be met by commodity storage warehouses and grain dealers in protecting producers and depositors of specific agricultural commodities as provided by chapter 22.09 RCW. These requirements were found in three rule chapters 16-212, 16-224 and 16-234 WAC which are being repealed. The new rule consolidates the essential requirements into a clear and usable format under one chapter. The proposed rule also establishes criteria allowing for outside temporary storage of agricultural commodities.
Proposal Changes the Following Existing Rules: The new rule consolidates chapters 16-212, 16-224, and 16-234 WAC into one rule and provides clarity to existing language for the benefit of commodity storage warehouse operators and grain dealers. The proposed rule establishes criteria for the temporary outside storage of agricultural commodities and the relicensing of outside storage under certain conditions.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
Rule Summary: The warehouse audit program advisory committee, consisting of four licensees and four producers, has reviewed and reorganized the program's three existing administrative rules. The committee recommended that chapters 16-212, 16-224, and 16-234 WAC be rolled into one rule, chapter 16-237 WAC, making it easier for stakeholders to access. The new rule includes all requirements for licensing and bonding of grain warehouse operators and grain dealers, financial statements, net worth and working capital, recordkeeping, printing of warehouse receipts, inventory access pipes in new construction, and outside storage of commodities.
The only new provision of the rule is contained in WAC 16-237-175(3). This section requires warehouse operators who are requesting relicensing of outside storage piles to draw and submit a sample for grading from those storage piles that have been covered and aerated. This provision establishes that a minimum of one sample for every 10,000 bushels in each outside storage pile, be submitted for grading prior to June 1st. The results of the grading must be made available to the department within ten days after the licensee receives the grades.
This will enable the department to protect the depositor by determining that the warehouse operator is maintaining the quality and condition of the commodity in an outside pile per the requirements of RCW 22.09.520 Deposits as bailments. That section states "Whenever any commodity shall be delivered to a warehouse under this chapter and the scale ticket or warehouse receipt issued therefor provides the return of a like amount of a like kind, grade, and class to the holder thereof...."
The purpose of the rule is to clarify and strengthen the rules specifying the responsibilities of commodity storage warehouses and grain dealers.
This rule is being adopted under the authority of chapter 22.09 RCW.
This process also responds to the governor's executive order requiring all administrative rules to be reviewed at least once every four years.
Industries Impacted by the Rule: WAC 16-237-175(3), affects state licensed grain warehouse operators storing commodities in covered and aerated ground storage piles that may be carried forward to the next license year.
The warehouse audit program issues approximately seventy licenses annually to commodity storage warehouse operators. These seventy licensees operate some four hundred ten separate warehouses located throughout the state with a total permanent licensed storage capacity of approximately 210,000,000 bushels. In addition to the 210,000,000 bushels of permanent storage, the program has approved the use of approximately 20,000,000 bushels of outside storage for twelve companies at twenty-four different locations for the license periods 98-99, and 99-00.
The use of outside storage is dependent on the amount of commodities in permanent storage that are carried forward to the next license period, and the projected intake of commodities for the coming harvest. The amount of outside storage that a warehouse operator may want to relicense is dependent on the amount of commodity deposited by producers that is sold in the marketplace over that time frame.
Operators may request approval for two types of outside piles. The first type is an open uncovered pile that must be picked up and placed in permanent storage by October 31st of the license period. The other type of outside pile is covered and aerated and may stay outside.
Of the 20,000,000 bushels approved for 98-99 and 99-00, 10,000,000 was left uncovered and was required to be picked up and placed in permanent storage by October 31st. The other 10,000,000 bushels of outside storage was aerated, covered by a tarp and therefore permitted to remain in outside storage. For the 2000-01 license period the program has approved the use of 31,500,000 bushels of outside storage to sixteen companies at forty-four different locations. Of that total, 13,400,000 bushels will be picked up by October 31st. 18,100,000 bushels will be aerated and covered and may be allowed to stay outside in the ground pile past the October 31st date.
Justification for Sampling and Grading Requirement: Because RCW 22.09.520 requires that warehouse operators maintain commodities in the same quality and condition as originally deposited by the depositor, the only method to ensure the quality and condition of commodities that is in a covered storage pile is to have samples drawn and submitted for grading.
In addition, this requirement provides alignment with and meets the requirements of the USDA/uniform grain and rice storage agreement for outside storage carried forward to the next federal contract period.
Reporting and Record-keeping Requirements: The state currently requires commodity storage warehouses to maintain a complete set of records with regard to the delivery, storage, purchase contracts with producers, shipping documents for covered commodities. These records include but are not limited to scale tickets, bills of lading, warehouse receipts, purchase and sales contracts, and a depositor ledger. There are no new record-keeping requirements.
Cost Analysis: While there are no reporting and record-keeping requirements for WAC 16-237-175 (3)(a), implementation of this section requires the drawing and submitting of samples for grading. There is a cost to the industry to draw samples and a need for professional services to grade the samples.
The following analysis was completed to determine the impact on grain storage warehouses:
The average size of an outside storage pile is approximately 500,000 bushels.
It takes approximately three people four hours to draw fifty samples. At the rate of $10.00 per manhour. The total cost of the sampling is approximately $120.00. The cost of the grading is based on the current cost per sample charged by the Washington State Grain Grading Laboratory of $7.75 per sample, for a cost of $387.50. Therefore, the total cost of sampling and grading a 500,000 bushel outside storage pile is less than $600.00.
Cost Impact for Industry: As required by rule, the average reported profit for grain warehouse operators for 1998 and 1999 was $196,750.00 and $252,298.00 respectively. For the 1998 and 1999 average profit figures, the cost to industry in meeting this requirement at $600.00 per pile per year is .3% of $196,750.00 and .2% of $252,928.00.
Industry Outreach: The department mailed a draft copy of the proposed rules to state grain storage examiners, and advisory committee members. We received valuable input as a result of the outreach and have incorporated them into the final draft rules.
Benefits: WAC 16-237-175, strengthens and clarifies the requirements for outside storage to include relicensing. This ensures that the quality and condition of commodities is being maintained as originally deposited as required by RCW 22.09.520, to reduce the risk of financial loss to depositors.
The agency will send a copy of the new rule to all state licensed commodity storage warehouses. The department will continue to provide technical assistance and oversight to the industry.
A copy of the statement may be obtained by writing to Don Michelbook, Program Manager, Grain Warehouse Audit Program, 222 North Havana, Spokane, WA 99212, phone (509) 533-2488, fax (509) 533-2486, e-mail whseaudit@agr.wa.gov.
Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. The Department of Agriculture is not a named agency under section 201.
Hearing Location: Spokane County Ag Center, 222 North Havana, Spokane, WA 99212, on October 3, 2000, at 1:30 p.m.
Assistance for Persons with Disabilities: Contact Lou Jones by September 27, 2000, TDD (360) 902-1996, or (360) 902-1806.
Submit Written Comments to: Washington State Department of Agriculture, Warehouse Audit, Don Michelbook, Program Manager, P.O. Box 11559 or 617 North Fancher Road, Building 103/D, Spokane, WA 99211 [99212], fax (509) 533-2486, by October 3, 2000.
Date of Intended Adoption: October 13, 2000.
August 22, 2000
Julie C. Sandberg
Assistant Director
OTS-4172.3
COMMODITY STORAGE WAREHOUSES AND GRAIN DEALERS
(1) "Permanent enclosed storage space" means that it has a foundation and both rigid walls and roof.
(2) "Warehouse operator" means the same as "warehouseman" which is defined in chapter 22.09 RCW.
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Commodities covered under chapter 22.09 RCW in respect to storage and/or merchandising shall include wheat, barley, oats, field corn, popcorn, rye, triticale, grain sorghum, soybeans, sunflowers, flax, buckwheat, rapeseed, safflower, millet, mustard, dry peas, dry beans, lentils, malt, and the by-products resulting from conditioning the above commodities.
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The grades and standards established by the United States Department of Agriculture as of August 1, 1984, for all grains and commodities included within the provisions of this chapter are hereby adopted. In addition, the procedures to sample, grade, test and weigh grains and commodities, established by the regulations and instructions under the United States Grain Standards Act and the Agricultural Marketing Act of 1946, are hereby adopted for this state.
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(1) A bond of not less than fifty thousand dollars nor more than seven hundred fifty thousand dollars shall be required for each warehouse operator and dealer licensed pursuant to chapter 22.09 RCW, the Washington Warehouse Act. The bond amount shall be computed at the rate of eighteen cents per bushel of licensed storage capacity or six percent of cost of covered commodities purchased from producers, whichever is higher.
(2) For purposes of this section, the cost of covered commodities purchased from producers will include only those commodities purchased during the preceding fiscal year of that dealer.
(3) Grain dealers who purchase less than one hundred thousand dollars annually from producers may petition the director for exemption from the bond requirements. A grain dealer who is granted exemption must:
(a) Pay for the commodity at time of taking possession by:
(i) Coin or currency; or
(ii) Cashier's check; or
(iii) Certified check; or
(iv) Bank draft.
(b) Dealers must maintain a copy of the contract, scale ticket and payment record. All documents must be complete and show the actual date of the transaction. If paid for in coin or currency, a receipt must be issued and signed and dated by the producer.
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A certificate of deposit, irrevocable letter of credit or assignment on a life insurance policy issued to the department in lieu of a bond shall not be released, canceled or discharged until three years after cancellation of the license unless the department determines that no outstanding claims exist for the subject period.
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A warehouse operator must maintain an allowable net worth of twenty cents per bushel of licensed space, with a minimum of twenty-five thousand dollars. A dealer must maintain an allowable net worth of four percent of sales of commodities purchased from producers, with a minimum of twenty-five thousand dollars. A warehouse operator who is also a dealer must maintain the higher of these two requirements. For a warehouse operator, any deficiency above the twenty-five thousand dollar minimum must be compensated for by increasing the amount of the warehouse operator's bond by the amount of the deficiency, up to the seven hundred fifty thousand dollar maximum. For a dealer, any deficiency above the twenty-five thousand dollar minimum must be compensated for by increasing the amount of the dealer's bond by the amount of the deficiency regardless of the seven hundred fifty thousand dollar maximum. Warehouse operators and grain dealers must maintain a current asset to current liability ratio of at least point nine to one. Deficiencies must be made up by providing additional bonding in the amount of the deficiency.
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Each warehouse operator and dealer shall submit to the department an annual financial statement which shall have been audited or reviewed by a certified or licensed public accountant. The statement must be submitted to the department within four months after the conclusion of the warehouse operator's or dealer's fiscal year. The statement shall include:
(1) A balance sheet.
(2) An income statement which includes annual gross sales of commodities from producers covered under the act.
(3) A statement of changes in financial position.
(4) Footnotes or schedule disclosure of:
(a) The total bushels received annually by commodity.
(b) The amount of each commodity in storage at end of year.
(c) The amount of each commodity held for depositors.
For purposes of this section, commodity refers to those commodities covered under the Washington Warehouse Act, chapter 22.09 RCW.
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Each warehouse operator shall maintain the following records at a location required by RCW 22.09.340:
(1) A printed daily position record showing by commodity:
(a) The amount received.
(b) The amount shipped.
(c) Adjustments.
(d) The amount forwarded to other locations.
(e) The amount in storage.
(f) The amount belonging to depositors.
(g) The amount belonging to the warehouse operator.
(2) A depositor ledger for each depositor showing:
(a) The amount deposited each day by scale ticket number.
(b) The amount transferred to warehouse receipts with the corresponding warehouse receipt number.
(c) The amount transferred to other locations.
(d) The amount purchased and purchase report number.
(e) The amount contracted to purchase and contract number.
(f) The amount delivered back to depositors.
(g) The lot numbers and grade.
(h) Any crop divisions.
(3) Scale tickets. In addition to the requirements in RCW 22.09.010(16), scale tickets must:
(a) Show location where the commodity is deposited.
(b) Show that the commodity is insured for current market value.
(c) Plainly indicate that it is nonnegotiable.
(d) Be filed numerically in the main office.
(4) Shipments out of warehouses must be filed by:
(a) Warehouse location; and
(b) Intra-company transfers must be on a prenumbered form and filed numerically by warehouse location.
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Each dealer shall maintain the following records at a location as required by RCW 22.09.340:
(1) Contracts. Contracts issued to producers must:
(a) Be serially numbered.
(b) Clearly indicate the date title passes.
(c) Show the net price due the producer or charges to be deducted from the selling price.
(d) Show the date payment is due.
(e) Indicate the method of adjustment for over and under deliveries.
(f) Show date paid.
(g) Be maintained in numerical sequence by month payment is due for outstanding contracts and completed contracts must be filed numerically.
(2) Delayed price contracts. Delayed price contracts must contain the following information:
(a) Indicate in large type the date title will pass.
(b) Show the method for setting price.
(c) Charges to be assessed.
(d) Commodity and quantity contracted.
(3) Purchase reports. Each dealer who purchases commodity from a producer must issue a purchase report to the producer at the time of payment which shall:
(a) Be prenumbered.
(b) Show commodity and quantity purchased.
(c) Show price and basis.
(d) Show discounts.
(e) Show itemized charges assessed the producer.
(f) Show the check number and date paid with one copy filed numerically.
(4) Producer ledger. Each dealer must maintain a producer ledger showing:
(a) The name of each producer from whom the dealer has purchased an agricultural commodity.
(b) The amount contracted with corresponding contract number.
(c) Scale ticket numbers, lot numbers and/or bills of lading to apply against the contract.
(d) The purchase voucher number.
(5) Daily position. All grain dealers shall maintain a daily position by commodity in regard to producer purchases showing:
(a) The net buy/sell position.
(b) The amount in pounds, bushels, tons, or hundred weight of delayed price contracts which the producer has not priced.
(c) The amount in pounds, bushels, tons, or hundred weight which the producer has priced but has not received payment.
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Warehouse operators storing treated seed for depositors must maintain, at a minimum, a separate daily position record by class for treated seed that shows the amount in pounds, bushels, or hundred weights owed to depositors.
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Warehouse operators and dealers who receive commodities for storage, handling, or conditioning shall post conspicuously a schedule of all charges, moisture adjustment factors, and disposition and/or ownership of all by-products. A copy of all charges assessed and billed to each depositor shall be itemized and retained in a numerical file.
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All scales used by warehouse operators and dealers must be certified for accuracy annually. Scale testing for certification may be performed by the department or by an approved scale company. When scales are tested by the department a seal shall be placed on the scales. The seal shall be dated and shall indicate approval or rejection. When scales are tested by an approved scale company, a copy of a scale test report shall be forwarded to the department and a copy shall be maintained in the warehouse operator's file.
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Prior to allocating storage space, each warehouse operator shall file a policy statement with the department of agriculture setting forth the criteria that identifies a person as a historical depositor as defined in RCW 22.09.010. Any subsequent changes in this policy shall be filed with the department.
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If the director determines that an emergency storage situation exists, a warehouse operator may forward warehouse receipted grain to other licensed warehouses for storage without canceling the depositor's warehouse receipt under the following conditions:
(1) The warehouse operator must notify the department prior to shipment.
(2) The warehouse operator must obtain a warehouse receipt in his/her name from the receiving warehouse.
(3) The warehouse operator be back in compliance with the requirements described in RCW 22.09.250 within thirty days.
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(1) Grain may be stored outside the warehouse operator's permanent enclosed storage space only under the following conditions:
(a) The warehouse operator has insufficient permanent enclosed storage space to handle commodities for the current license year.
(b) Outside storage shall be on ground properly crowned and groomed to provide adequate drainage. Prior to its use, the storage space shall be approved by the department.
(c) Outside storage not filled through the warehouse operator's permanent enclosed storage facility shall have a separate letter designation and license fee.
(d) Outside storage must be free of contact with any building or elevator after October 15th of each year.
(e) The warehouse operator shall maintain a net worth of twenty-five cents per bushel in addition to the net worth requirements of WAC 16-237-035.
(2) Uncovered and/or nonaerated outside storage must be moved to a covered licensed storage facility by October 31st. A warehouse operator may submit a written request to the department for a thirty-day extension. The request for extension shall indicate the amount and condition of the commodity for which the extension is requested along with other information that may be necessary to assist the department in the evaluation of the request. This request must be received by October 15th. The request will be granted upon satisfying the following conditions:
(a) That the amount of outside storage does not exceed fifty-percent of the warehouse operator's license permanent enclosed storage space.
(b) The warehouse operator maintains a total net worth of seventy-five cents per bushel for uncovered outside storage in addition to the net worth requirements of WAC 16-237-035.
(c) There is no unreasonable risk to depositors.
(3) Licensed outside piles that have been covered and aerated prior to November 1 may be relicensed for the next license period provided that the warehouse operator samples each pile and submits the samples for grading.
(a) A sufficient number of samples that is representative of the entire pile shall be drawn, at a minimum, one sample for every ten thousand bushels in each outside pile and submitted for grading by June 1st. Samples are required to be graded using the grades and standards established by the United States Department of Agriculture.
(b) The results of the grading must be made available to the department within ten days of receipt of the grades.
(c) The department may deem that the requirements of this subsection have been met if outside storage samples are drawn and graded under the requirements of a United States Department of Agriculture Uniform Grain and Rice Storage Agreement and those certificates are provided to the department.
(d) If the average of the grades of the samples falls two grades below the average of the grades when the commodity was placed in the outside pile, the pile will not be approved for relicensing. Unless otherwise documented, "average grade" is considered to be U.S. No. 1.
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(1) Warehouse licenses issued under RCW 22.09.070 shall expire on June 30th after the date of issuance.
(2) If the application for renewal of a warehouse license(s) is not received by the department prior to June 30th of any year a penalty shall be assessed as provided by RCW 22.09.050.
(3) Subsequent to the expiration of a license, nothing herein shall be construed to limit the department's ability to enforce applicable laws as provided by chapter 22.09 RCW.
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(1) Grain dealer license issued under RCW 22.09.075 shall expire on June 30th after the date of issuance.
(2) If the application for renewal of a grain dealer license is not received by the department prior to June 30th of any year, a penalty shall be assessed as provided by RCW 22.09.055.
(3) Subsequent to the expiration of a license, nothing herein shall be construed to limit the department's ability to enforce applicable laws as provided by chapter 22.09 RCW.
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A warehouse not licensed prior to July 1, 1983, must meet the following requirements:
(1) Tanks and stices over two hundred bushels per foot must have inventory holes situated in such a manner as to allow the measurement of the high and low points of the commodity.
(2) Conventional flat storage must have an overhead catwalk with a minimum of five feet of headroom.
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These fees shall be applied to the following services:
(1) Measurement of new or additional storage including outside grain storage that requires a second and/or additional inspection or measurement, per hour . . . . . . . . . . . . $ 23.00
(2) Special year end audits that require remeasurement at the request of the warehouse operator, per hour . . . . . . . . . . . . $ 23.00
(3) Commodity Credit Corporation samples may be drawn by department personnel at the rate established by the grain inspection program.
(4) Appropriate overtime charges, mileage, and travel charges incurred by department personnel shall be assessed.
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The department of agriculture will allow warehouse operators to have their negotiable warehouse receipts printed by a private printer only when the state printer cannot supply said receipts within a reasonable time in the form requested and at a competitive price as determined by the director.
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Warehouse operators who require receipts as set forth in WAC 16-234-010 shall apply to the director and furnish the following:
(1) A bond for one thousand dollars as provided for in RCW 22.09.300.
(2) Complete the department's "requisition for negotiable warehouse receipts" form, and forward to the department for both approval and forwarding to said private printer.
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Upon receipt of a completed "requisition for negotiable warehouse receipts" form, the private printer shall print the authorized negotiable warehouse receipts, and upon completion of printing notify the department, by use of the "affidavit of printer" form, the number of negotiable warehouse receipts printed and the inclusive numbers as specified.
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OTS-4250.1
REPEALER
The following chapter of the Washington Administrative Code is repealed:
| WAC 16-212-010 | Definitions. |
| WAC 16-212-020 | Grain and commodity inspection points. |
| WAC 16-212-030 | General provisions for hourly charges. |
| WAC 16-212-060 | Official inspection and/or weighing fees under the United States Grain Standards Act. |
| WAC 16-212-070 | Official services under the Agricultural Marketing Act of 1946. |
| WAC 16-212-080 | Miscellaneous fees. |
| WAC 16-212-082 | Fees for services performed under state regulation. |
| WAC 16-212-086 | Fees for warehouse audit and related services. |
| WAC 16-212-087 | Covered commodities. |
| WAC 16-212-110 | Bonds. |
| WAC 16-212-120 | Grades and standards. |
| WAC 16-212-125 | Licenses; warehouse, terminal warehouse, country warehouse -- Late renewal penalty. |
| WAC 16-212-126 | Grain dealer license -- Late renewal penalty. |
| WAC 16-212-127 | Warehouse license expiration. |
| WAC 16-212-128 | Grain dealer license expiration. |
| WAC 16-212-130 | Net worth requirements. |
| WAC 16-212-160 | Financial statements. |
| WAC 16-212-170 | Dealer records. |
| WAC 16-212-180 | Warehouseman records. |
| WAC 16-212-190 | Shipments. |
| WAC 16-212-195 | Inventory requirements. |
| WAC 16-212-215 | Scales. |
| WAC 16-212-220 | Signs. |
| WAC 16-212-225 | Charges. |
| WAC 16-212-230 | Certificates of deposit, letters of credit, life insurance. |
| WAC 16-212-235 | Seed warehouseman records. |
OTS-4251.1
REPEALER
The following chapter of the Washington Administrative Code is repealed:
| WAC 16-224-010 | Combining certain warehouses into stations. |
| WAC 16-224-020 | Definition. |
| WAC 16-224-025 | Emergency storage. |
| WAC 16-224-030 | Contemporary grain storage. |
| WAC 16-224-040 | Historical depositor. |
OTS-4252.1
REPEALER
The following chapter of the Washington Administrative Code is repealed:
| WAC 16-234-001 | Promulgation. |
| WAC 16-234-010 | Printing by private printer -- When. |
| WAC 16-234-020 | Bond requirements. |
| WAC 16-234-030 | Completion of printing. |