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Proposed Repeals and New Rules: N.J.A.C. 2:55-3.2 and 5.1
Authorized By: State Board of Agriculture and Charles M. Kuperus, Secretary.
Authority: N.J.S.A. 18A:18A-6.
Calendar Reference: See Summary below for explanation of exceptions to calendar requirement.
Proposal Number: PRN 2006-236.
Submit written comments only by October 6, 2006 to:
Alfred W. Murray, Director
Division of Marketing and Development
New Jersey Department of Agriculture
P.O. Box 330
Trenton, New Jersey 08625
The agency proposal follows:
Summary
Pursuant to N.J.S.A. 52:14B-5.1, the rules in this chapter are scheduled to expire on July 1, 2006. In accordance with N.J.S.A. 52:14B-5.1c, the submission of this notice of proposal to the Office of Administrative Law extends that expiration date 180 days, to December 28, 2006. The Department of Agriculture has reviewed these rules, as amended, and has found them to be necessary, reasonable and proper for the purpose for which they were promulgated.
Chapter 55 was promulgated to regulate the purchase and sale of fresh milk by vendors to New Jersey school districts, thereby providing protection to New Jersey dairy farmers who sell and consumers who buy these products. As such, the rules proposed for readoption with amendments primarily affect New Jersey vendors (licensed milk dealers), and will benefit New Jersey dairy farmers and consumers, primarily school children. These rules set forth the reporting requirements of each New Jersey board of education, all New Jersey vendors (milk dealers) selling milk to New Jersey schools, and all associations of producers. In addition, these rules set forth the calculations for determining compliance with milk purchase requirements and the criteria for transfers, diversion and substitution of milk. Furthermore, these rules outline the process for proving the unavailability of milk, placing this burden of proof on the milk vendors selling to New Jersey schools, and describe the responsibility of the Department of Agriculture (“Secretary”) in determining the validity of a claim of unavailability of New Jersey milk.
Subchapter 1 sets forth the general requirements for school milk contracts. Specifically, N.J.A.C. 2:55-1.1 delineates the definitions to be used in this chapter. Significant amendments were made to N.J.A.C. 2:55-1 to provide definitions for words previously left undefined. Specifically, definitions for “Department,” “New Jersey producers” and “person” were added. In addition, the definition of “fresh milk” was amended and is now called “school milk.” “School milk” was amended to include “fluid milk or cream” and “fortified whole or skim milk” that are or may be provided by schools. A new definition of “fresh milk” was added to differentiate between milk purchased for schools and milk produced by New Jersey producers. “Fresh milk” is now defined as any natural product of a dairy animal produced by New Jersey producers. The term “Secretary” has been amended to now permit a designee to act on behalf of the Secretary to increase Department efficiencies under this chapter. The term “year” has also been amended to coincide with the school year rather than a choice between a school year or a contract year. This amendment will better assist the Department in determining compliance, as it will have a uniform standard to judge compliance. Lastly, the definitions for “association of producers” and “vendors” were amended to provide more clarity. “Association of producers,” changed from “New Jersey Association of Producers,” was amended to clarify that the definition can apply to more than one association. “Vendor” has been amended to include anyone who sells milk to schools, not just licensed dealers, and makes clear licensed dealers are still subject to the requirements of this chapter.
Each section of this chapter was amended to be consistent with the new definitions. Proposed amendments were also made to N.J.A.C. 2:55-1.1 and 2:55-3.1 to reflect the updated citation referenced in these sections. This change was necessitated due to sections repealed by P.L.1977, c.114, §1, which were recodified in N.J.S.A. 18A:18A-6.
Subchapter 2 provides the reporting requirements for school boards, vendors, and associations of producers. N.J.A.C. 2:55-2.1(a) and 2.2(a) are deleted because reporting submission references that were originally promulgated to ensure prompt compliance at the time of the original adoption are currently unnecessary. New N.J.A.C. 2:55-2.1(a) now requires the Secretary to send forms to each school board once a year inquiring into whether the school board intends to enter into any school milk contracts for the school year. School boards must return these forms within 15 days of receipt. An amendment delineating the type of copy acceptable to be submitted was added to N.J.A.C. 2:55-2.1(b), which requires schools to send a copy of the contract to the Department.
N.J.A.C. 2:55-2.2(b) was also amended to require vendors to file their monthly reports on forms provided by the Department. Such forms shall be filed on the 20th day of the month, rather than the 10th, to be consistent with the dates for filing other required paperwork. An amendment to N.J.A.C. 2:55-2.2(a), recodified from N.J.A.C. 2:55-2.2(b), was added to require vendors to submit a list of all school districts with which the vendor holds a contract. Such an amendment will assist the Department in determining compliance with this chapter. N.J.A.C. 2:55-2.2(b), recodified from N.J.A.C. 2:55-2.2(c), has been amended to clarify that all New Jersey milk purchased from any source must be reported and to specifically require the reporting to be done on forms provided by the Department. In addition, this subsection was amended to require reporting of all New Jersey milk transferred to another vendor, so that the Department can better track whether vendors have met their obligations under this chapter. Technical changes have also been made to N.J.A.C. 2:55-2.2 in order to maintain a logical and consistent arrangement of the subsections.
N.J.A.C. 2:55-2.3 has been updated to reflect the new definitions and to include a statutory citation. Proposed new rule N.J.A.C. 2:72-2.4 has been added, which describes the conditions under which information will be held confidential and references privileges and limitations set forth in 7 CFR 205.501 and 205.504 and N.J.S.A. 47:1A-1 et seq. regarding access to information.
Subchapter 3 establishes the methods of computation that will be used by the Department to determine whether compliance with this chapter has occurred. N.J.A.C. 2:55-3.1 spells out the exact methodology to be used in computing the amount of milk required to be purchased by the vendors, the amount of milk actually produced by the producers, and the amount of milk available for transfer by the vendor. The calculations in section 1 were designed to include all milk sold to schools, whether or not done through the vendor, a subdealer or some other agent. As a result, N.J.A.C. 2:55-3.1(a)2 is no longer necessary and has been deleted. Amendments to N.J.A.C. 2:55-3.1(a)2, recodified from N.J.A.C. 2:55-3.1(a)3, require New Jersey produced milk to be computed as “fresh milk” received from any source. Thus, the language in subparagraphs (a)2i through iii were deleted as they are no longer necessary. The remaining amendments to N.J.A.C. 2:55-3.1 are necessary for consistency with the new definitions and to correct a citation. N.J.A.C. 2:55-3.2 sets forth the requirements and prohibitions on transfer or diversion. Although this section was repealed in its entirely and replaced with a new rule, the intent of N.J.A.C. 2:55-3.2(a) remains the same: milk purchased during a month can only be credited towards fresh milk purchases for the month in which the milk was bought. Subsection (b) was deleted because transfers of milk from vendors to other vendors are now discussed in N.J.A.C. 2:55-3.1 rather than 3.2, and N.J.A.C. 2:55-3.1 specifically delineates the conditions under which milk may be transferred to other vendors. Additional technical amendments were made to this subchapter to ensure consistency with the new definitions.
Subchapter 4 provides the criteria that will be used to determine the unavailability of milk. N.J.A.C. 2:55-4.1(a)1 was revised to now require proof detailing efforts made by the vendor to procure milk from New Jersey producers, in addition to showing the total amount of milk sold to schools exceeded the amount of New Jersey produced milk. In addition, N.J.A.C. 2:55-4.2 was amended to remove the possibility of requiring milk to be purchased in subsequent months for any month in which there was not fresh milk available to a vendor. This section was also amended to clarify that a vendor’s failure to meet its burden of proof as to the availability of fresh milk will constitute a violation of this chapter. N.J.A.C. 2:55-4.2(a) was amended to permit the Secretary’s decision to be based on either the information provided in N.J.A.C. 2:55-4.1(a)1 or 2. Previously this section only required consideration of the information in paragraph (a)2. Technical amendments were also made to this subchapter to reflect the new definitions that were added.
Finally, Subchapter 5 sets forth the penalties for failing to acquire sufficient fresh milk as required in the agreement. N.J.A.C. 2:55-5.1 was repealed and new rules set forth the fines that are associated with violating this chapter, as provided by statute. N.J.A.C. 2:55-5.1 provides that the Secretary will make the initial decision as to whether a vendor met its burden of proof or has violated the provisions of Chapter 55, and provides for an administrative hearing for anyone aggrieved by a decision of the Secretary.
As the Department has provided a 60-day comment period for this notice of proposal, this notice is excepted from the rulemaking calendar requirement, pursuant to N.J.A.C. 1:30-3.3(a)5.
Social Impact
The rules proposed for readoption with amendments, repeals and new rules will affect all New Jersey dairy farmers, all New Jersey school milk vendors, and all New Jersey school districts. These rules assure that New Jersey dairy farmers receive the benefit of an effective milk control regulation and that New Jersey school children are afforded the means of receiving a supply of fresh milk. Failure to readopt these rules as amended will remove the assurance for New Jersey dairy producers to have a local economical outlet for their product. Without a sufficient economical outlet, the dairy producers in this State will likely relocate elsewhere, leaving New Jersey without a local supply of fresh milk. Therefore, New Jersey citizens as a whole will benefit from the rules proposed for readoption, as the rules help assure that New Jersey maintains a local supply of fresh milk, thereby creating an overall positive social impact.
The proposed amendments, repeals and new rules to N.J.A.C. 2:55 will also have a positive social impact because the amendments are designed to improve the Department’s ability to track compliance with these rules. Poor enforcement of these rules could result in the loss of an important economic outlet for New Jersey. Such a loss could be devastating to the dairy industry, especially now at a time of extensive decline in milk prices received by producers.
Economic Impact
The rules proposed for readoption with amendments, new rules and repeals beneficially affect New Jersey dairy farmers (producers) and New Jersey schools. The rules proposed for readoption with amendments, repeals and new rules provide for the continuation of protection of New Jersey dairy farmers (producers) from potential economic harm through the transfer, diversion and substitution restrictions. Specifically, the rules proposed for readoption establish the criteria in which to determine whether the statutory obligation to buy milk from New Jersey producers has been met. Most of the proposed amendments are technical in nature and will have no impact.
This chapter also benefits New Jersey public school children by creating a market environment wherein supplies of New Jersey produced milk are available throughout the year.
Approximately 115 New Jersey dairy producers receive direct benefits from these rules proposed for readoption with amendments, repeals and new rules by ensuring that the farmers have a stable buyer for their product. New Jersey’s dairy industry is an important segment of the agricultural economy, supplying almost one-eighth of the fluid milk and dairy products used by New Jersey consumers. New Jersey dairy producers are important to the State’s economy, particularly for rural communities. These rules will help ensure more stable business operations for dairy producers.
It is not anticipated that the rules proposed for readoption with amendments, new rules and repeals will cause any negative impact. There are no foreseeable costs associated with these rules as they relate to producers and schools. There will, however, be economic impacts to milk vendors, as these rules require the purchase of New Jersey milk in equivalent amounts as are required to fulfill their school contracts. Compliance costs associated with the rules proposed for readoption with amendments, new rules and repeals will be minimal, and the proposed amendments, new rules and repeals do not require any additional costs. However, anyone violating the provisions of N.J.S.A. 18A:18A-6 or these rules will be subject to a monetary penalty. Since this penalty is imposed only for noncompliance, this cost is avoidable.
Federal Standard Statement
Executive Order No. 27 (1994) and P.L.1995 c. 65 require State agencies that adopt, readopt or amend State rules exceeding any Federal standards or requirements to include in the rulemaking document a comparison with Federal law. As related to this chapter, the rulemaking requirements are dictated by the Public Schools Contracts Law, specifically N.J.S.A.18A:18A-6. Although 7 U.S.C. §608C and 7 CFR Part 1001.1 et seq. establish minimum milk purchasing requirements, the rules proposed for readoption with amendments, repeals and new rules do not mandate any minimum or maximum milk prices for the school milk contracts. Rather, the rules merely require vendors of school milk to buy a minimum amount of milk from New Jersey producers pursuant to N.J.S.A. 18A-18A-6. Therefore, this Federal requirement is unaffected by these rules. Several Federal programs, however, do have procurement requirements for schools purchasing milk for their Federal programs. The Special Milk Program for Children, 7 CFR 215.6, the School Lunch Program, 42 U.S.C. §1760 and 7 CFR 210.21, and the Child and Adult Care Food Program, 7 CFR 226.22, all require milk procured for the program to be milk produced in the United States. The rules proposed for readoption with amendments, repeals and new rules meet but do not exceed these Federal requirements. Since the rules proposed for readoption with amendments, repeals and new rules do not exceed any Federal standards, a Federal standards analysis is not required.
Jobs Impact
It is not anticipated that the rules proposed for readoption with amendments, repeals and new rules will result in the generation or loss of any jobs.
Agriculture Industry Impact
For the reasons set forth in the Summary, Social Impact and Economic Impact above, the rules proposed for readoption with amendments, repeals and new rules will have a positive impact on the agriculture industry.
Regulatory Flexibility Analysis
In addition to all New Jersey school boards (672), the rules proposed for readoption with amendments, repeals and new rules apply to approximately 300 vendors (milk dealers), and 115 dairy producers, most of whom are small businesses as defined by the New Jersey Regulatory Flexibility Act, N.J.S.A. 54:14B-16 et seq. Small businesses will be affected, but to no greater extent than in the past. Uniform standards for all vendors (milk dealers), school boards and dairy producers are necessary to ensure New Jersey producers have a local economical outlet for their product and New Jersey school children receive a supply of fresh milk.
As indicated in the Summary above, reporting and compliance requirements are imposed by these rules. It is not anticipated that these rules proposed for readoption with amendments, new rules and repeals will result in any additional recordkeeping requirements beyond those that may be necessary to comply with the reporting requirements. Compliance, therefore, is not anticipated to be overly burdensome because the reports required are designed to be taken directly from records already kept by vendors (milk dealers) and New Jersey school boards. Generally the necessary reporting systems are in place and are not likely to experience the need for additional efforts to comply with these rules. Initial capital costs and annual costs of compliance are minimal for both large and small businesses; therefore, the Department has not applied differing or lesser standards based on business size. While there are compliance and reporting requirements as set forth above, no capital expenditures or professional services will be necessary as a result of the rules proposed for readoption with amendments, repeals and new rules.
Smart Growth Impact
The Department anticipates that there will be no impact on the achievement of smart growth or upon the implementation of the State’s Development and Redevelopment Plan from the rules proposed for readoption with amendments, repeals and new rules because they do not affect the growth, development, renewal or conservation of any land area in this State.
Full text of the rules proposed for readoption may be found in the New Jersey Administrative Code at N.J.A.C. 2:55.
Full text of the proposed amendments, repeals and new rules follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
2:55-1.1 Definitions
The following words and terms, as used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:
"Agreement" means the agreement required by N.J.S.A. [18A:18-5] 18:A-18A-6.
“Association of producers" means an association engaged in the business of selling or distributing fresh milk, qualified to do business in the State of New Jersey and whose membership includes at least one New Jersey producer.
"Board" means board of education of any school district in the State of New Jersey.
“Department” means the New Jersey Department of Agriculture.
["Fresh milk" means all milk sold to "boards" which is intended for direct consumption and shall include whole milk, skim milk, low fat milk, buttermilk, flavored milk, cream and mixtures of milk and cream, all of which products are considered in the trade as "fluid milk".]
“Fresh milk” means the natural product of a dairy animal or animals produced by New Jersey producers or associations of producers and includes fluid milk and cream, whole milk, skim milk, low fat milk, fortified whole or skim milk, buttermilk, flavored milk, any milk drink, cream and mixtures of milk and cream, all of which products are considered in the trade as "fluid milk."
["New Jersey Association of Producers" means an association of milk producers qualified to do business in the State of New Jersey and whose membership includes milk producers (dairy farmers) living in the State of New Jersey.]
“New Jersey producers” means any person engaged in the business of producing milk in New Jersey.
“Person” means any individual, corporation, business, partnership, association, cooperative, limited liability company, or other legal entity.
"Secretary" means Secretary of Agriculture of the State of New Jerseyor his or her designee.
"School milk" means all milk sold to boards which is intended for direct consumption and shall include fluid milk and cream, whole milk, skim milk, low fat milk, fortified whole or skim milk, buttermilk, flavored milk, any milk drink, cream and mixtures of milk and cream, all of which products are considered in the trade as "fluid milk."
"Vendor" means any [licensed milk dealer, subdealer or producer dealer] person who sells or offers to sell [fresh]school milk to any ["]board["] as defined in this [Section,] section including, but not limited to, any person required to be licensed pursuant to N.J.S.A. 4:12-2 or 4:12A-28.
"Year" means the [contract or] school year during which [fresh] school milk is offered to be sold or sold to a "board" as defined in this [Section] section.
2:55-2.1 Reports by boards
[(a) Each board, which has not previously filed such, shall file with the secretary within 15 days after the effective date of this Chapter a copy of the agreement which was executed by the vendor for the current year. Such copy may be a carbon copy, a photocopy or a certified copy of the original on file in the office of the board.]
(a) On or before September 1 of each year, the Secretary shall send each board a form inquiring as to whether the board has purchased or will be purchasing school milk for the year. The board must fill out the form and return it to the Department within 15 days of receipt.
(b) For all contracts entered into for the purchase of school milk from and after the effective date of this [Chapter]chapter, each board shall file a copy of the agreement with the Secretary before the effective date of the contract or within 15 days after the agreement is signed, whichever occurs first. Such copy may be a facsimile, a photocopy or a certified copy of the original on file in the office of the board.
2:55-2.2 Reports by vendors
[(a) Each vendor shall file with the Secretary within 15 days after the effective date of this Chapter a list of all schools being served during the current year and a list of the boards with whom he has entered into contract for the supply of fresh milk.]
[(b)] (a) For all contracts entered into for the purchase of school milk from and after the effective date of this [Chapter]chapter all vendors shall notify the Secretary of such contract before the effective date of the contract or within 15 days after the contract is awarded, whichever occurs first. Notification to the Secretary shall include a list of all schools to be served and a list of the boards with whom the vendor has entered into contract for the supply of school milk.
[(c)] (b) All vendors shall file verified monthly reports on forms provided by the Department detailing the amount of [purchases of milk from New Jersey producers or associations of producers and sales] fresh milk purchased from any source, the amount of school milk sold to schools during the preceding month, and the amount of fresh milk transferred during the month and to whom it was transferred. Such reports shall be filed to reach the Office of the Secretary on or before the [tenth]20th day of the month following the month for which the report is prepared. Such reports shall be on forms prescribed and furnished by the Secretary.
2:55-2.3 Reports by associations of producers
(a) Associations of producers[, other than vendors,] shall determine the amount of fresh milk received [from New Jersey producers] and shall report sales of such milk to vendors each month.
(b) Such report shall be in addition to any other reports required to be filed by the Milk Control Act of the State of New Jersey, N.J.S.A. 4:12A-1 et seq.
2:55-2.4 Confidentiality of reports
The New Jersey Department of Agriculture will hold confidential any information obtained pursuant to N.J.A.C. 2:55-2.1 through 2.3 that constitutes proprietary commercial or financial information, or is otherwise protected from disclosure under 7 CFR Part 205.501 and 205.504 or the Open Public Records Act, N.J.S.A. 47:1A-1 et seq., subject to the limitations set forth therein.
2.55-3.1 Computations
In determining whether a vendor complied with the requirement to purchase fresh milk from the New Jersey producers or associations of producers, the following computations shall be made for each month during the year:
- Compute the total amount of school milk sold to all boards subject to the provisions of N.J.S.A. [18A:18-5.1] 18A:18A-6 by each vendor;
[2. Combine into one total all milk sold by each dealer (vendor) and his subdealers (vendors) to boards during the month;]
[3.]2. Compute the total fresh milk purchased [from New Jersey producers] by each vendor during the month by adding[:] the total amount of fresh milk received by the vendor from all sources; and
[i. The total milk received directly from such producers;
ii. New Jersey-produced milk received from associations of producers; and
iii. New Jersey-produced milk received from other dealers.]
[4]3. Subtract the pounds of [fresh] school milk sold by each vendor to all boards from the pounds of fresh milk purchased [from New Jersey producers]. Any plus amount represents the maximum amount that the vendor could [be transferred] transfer to other vendors during the month for use in meeting the requirements of [the Act] N.J.S.A. 18A:18A-6 and this chapter for the purchase of [New Jersey] fresh milk, but any such amount may not be credited against transfers to other [dealers] vendors in subsequent months.
2:55-3.2 Allocation to associations of producers
[(a) Any milk received by an association of producers during the month may not be credited against transfers or diversions of milk to other dealers or vendors during subsequent months and an association of producers may not substitute milk produced in another state for New Jersey produced milk assigned to a specific dealer.
(b) This provision shall not, however, prevent a dealer receiving such milk from transferring it to a vendor pursuant to N.J.A.C. 2:55-3.1(a)4.]
Any fresh milk sold to a vendor by an association of producers must be fresh milk received by the association of producers during the month within which it was sold.
2:55-4.1 Burden of proof
(a) The burden of proving that fresh milk was not available [from New Jersey producers in filling a school contract] to comply with the agreement may be met in either of the following ways:
1. By demonstrating that the total sales of school milk to New Jersey school boards by all vendors for the month was in excess of the total amount of fresh milk produced [by New Jersey producers] and detailing the efforts made throughout the month to acquire fresh milk; or
- By advising the Secretary in writing on a month-by-month basis that [such] fresh milk was not available from any source and detailing the efforts made throughout the month to acquire [such] fresh milk.
2:55-4.2 Responsibility of Secretary
(a) Upon receipt of a report pursuant to N.J.A.C. 2:55-4.1(a)1 or 2, the Secretary shall verify that [such] fresh milk was not available [and determine that an equivalent amount cannot be obtained during subsequent months in the contract period] and shall notify the vendor of [his] the Secretary’s finding.
(b) A finding by the Secretary that [the] fresh milk was available shall void the offer of proof by the vendor, and shall constitute a failure to acquire sufficient fresh milk to comply with the agreement in violation of N.J.S.A. 18A:18A-6 and this chapter.
(c) The requirement to pay reasonable handling charges above the Class I price shall not be considered by the Secretary in determining unavailability of fresh milk.
[2:55-5.1 Scope
The failure of a dealer (vendor) to acquire enough New Jersey-produced milk to fulfill all contracts held by the dealer and his subdealers (vendors) shall make both the dealer and the subdealers subject to the sanctions included in N.J.S.A.18A-18-5.1.]
2:55-5.1 Penalties
(a) Any vendor who fails to acquire enough fresh milk to satisfy the requirements of N.J.S.A. 18A:18A-6 and this chapter shall be subject to the a penalty of no less than $100.00 or more than $500.00 per day for each day of noncompliance.
(b) No penalties will be assessed if the Secretary determines, in accordance with N.J.A.C. 2:55-4.2, that the vendor has satisfied the burden of proof as to the unavailability of fresh milk as set forth in N.J.A.C. 2:55-4.1.
(c) The Secretary shall make the initial determination as to whether a violation of N.J.S.A. 18A:18A-6 and this chapter has occurred and what penalty should be assessed pursuant to (a) above.
(e) Any vendor who is aggrieved by the determination of the Secretary pursuant to this section shall, upon written request transmitted to the Department within 20 days of the penalty assessment be afforded the opportunity for a hearing thereon in the manner provided for contested cases pursuant to the Administrative Procedure Act, N.J.S.A 52:14B-1 et seq., and the Administrative Procedure Rules, N.J.A.C. 1:1.
(g) Pursuant to N.J.S.A. 18A:18A-6, actions to enforce the provisions of this section may be brought by and in the name of the Secretary against any person that fails to comply with the requirements of N.J.S.A. 18A:18A-6 or this chapter. Any penalties assessed pursuant to (a) above shall be recovered by and in the name of the Secretary and shall be paid to the school district named in the proceeding.
