Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 907 (Ma) - Processors of farm products.
Amended: June 21, 2012Policy Vote: Ag 7-0
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Jennifer Douglas
This bill does not meet the criteria for referral to the
Bill Summary: AB 907 authorizes the Department of Food and
Agriculture to impose sanctions three times the amount of unpaid
or underpaid license fees and requires any bond or irrevocable
guarantee, placed in lieu of proof of financial responsibility,
to include both past and future debts owed as a requirement of
obtaining a processor's license. Because this bill would direct
the deposit of these penalties into the Department of Food and
Agriculture Fund, a continuously appropriated fund, the bill
would make an appropriation.
Likely minor increase in revenue from additional penalties
deposited in the Department of Food and Agriculture Fund for
unpaid licensing fees.
Background: Existing law requires processors of farm products to
be licensed by the Department of Food and Agriculture
(department) and to provide up to four years' history of
financial records with their processors license application to
the Market Enforcement Branch (MEB). An application for
licensure is denied if the applicant is not found to be
financially responsible, however the applicant may choose to
post an irrevocable guarantee for a minimum of $10,000, or 20
percent of the total value of the products they intend to
purchase, in lieu of proof of financial responsibility.
The Processors Law protects growers from unfair business
practices by processors of agricultural products, including
independent winegrape growers who sell their grapes to wineries.
Most wineries pay farmers for delivered grapes in a timely
manner, however each year a few wineries neglect to pay growers,
AB 907 (Ma)
causing economic hardship to those farmers.
The MEB is responsible for the licensing of dealers, buyers and
processors, conducting audits and investigations, ensuring
timely payment for producers and dealers of farm products,
settling transaction complaints, and enforcing disciplinary
action when appropriate.
Under existing law a person found to be operating a business
without a license in the past five years or who has failed to
pay a license fee is required to pay additional penalties to the
department, including an amount equal to that portion of the
fees that were not paid for the last five operating years.
Proposed Law: AB 907 would define irrevocable guarantee to
include a personal or corporate guarantee, a certificate of
deposit, a bank letter of credit or a surety bond, and would
require any irrevocable guarantee, placed in lieu of proof of
financial responsibility, to include both past and future debts
owed as a requirement of obtaining a processor's license.
This bill would also increase, by three times, the penalties
levied against licensees with any unpaid fees within the last
Staff Comments: The fiscal impact on the department would be
minimal. Because this bill increases the penalties levied
against licensees with unpaid fees, the MEB could potentially
see an increase of revenue depending on the number of additional
penalties collected from processors operating without a license.