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VOLUME 18, NUMBER 4, WHOLE NUMBER 209MARCH 2001
•Important biotechcases involvepatentability ofplants and licensingof technology•Interpreting statutorygrants of immunityfrom liability•StarLink incident•GMOs and TRIPs
Solicitation of articles: All AALAmembers are invited to submitarticles to the Update. Please in-clude copies of decisions and leg-islation with the article. To avoid duplication of effort, please no-tify the Editor of your proposed article.
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Continued on page 2 Continued on page 2
United States Supr United States Supr United States Supr United States Supr United States Supr eme Cour eme Cour eme Cour eme Cour eme Cour t r t r t r t r t r ules thatules thatules thatules thatules thatBanks f Banks f Banks f Banks f Banks f or Cooper or Cooper or Cooper or Cooper or Cooper atiatiatiatiatives ar ves ar ves ar ves ar ves ar e subject toe subject toe subject toe subject toe subject tostate income taxationstate income taxationstate income taxationstate income taxationstate income taxation
In a unanimous opinion, the United States Supreme Court has ruled that CoBankACB, as the successor to the National Bank for Cooperatives, is subject to Missouristate income taxes.
Director of Revenue of Missouri v. CoBank ACB
, No. 99-1792,2001 WL 137461 (U.S. Feb. 20, 2001). In so doing, the Court rejected CoBank’scontention that as a federal instrumentality it is shielded from state taxation by theSupremacy Clause and the doctrine of implied tax immunity that originated in
McCulloch v. Maryland
, 4 Wheat. 316, 4 L.Ed. 579 (1819). Under this doctrine,federal instrumentalities are entitled to implied tax immunity when they are soclosely connected to the federal government “that the two cannot be realistically beviewed as separate entities.
CoBank
, 2001 W.L. 137461 at *4 (quoting
United Statesv. New Mexico
, 455 U.S. 720, 735 (1982)).Banks for cooperatives were created by the Farm Credit Act of 1933. Under thecurrent Act, they are denominated as “federally charted instrumentalities of theUnited States.”
See
12 U.S.C. § 2121. Their mission is to provide credit to farmercooperatives. Although the initial capital for the banks was provided by the federalgovernment through investments in bank stock, the Act contemplated that thiscapital would be repaid, leaving the banks privately owned by their member-borrowers.Recognizing that the federal government would hold stock in the banks until thefederal government’s initial capital contribution was repaid, the 1933 Act subjectedbanks for cooperatives to state income taxation except when the United States heldtheir stock. In 1971, Congress amended the Farm Credit Act, but it left intact thelimited immunity from state taxation established by the 1933 Act. At the time,however, this immunity was of no avail to the banks because all of the federalgovernment’s initial investment had been repaid.The Farm Credit Act was amended again in 1985. This time Congress eliminatedthe authority of Farm Credit Administration (FCA), a federal agency, from owningstock in banks for cooperatives. Since the original federal government investments
Classifying pr Classifying pr Classifying pr Classifying pr Classifying pr oducer oducer oducer oducer oducer s in todas in todas in todas in todas in today’y’y’y’y’sssssag ag ag ag ag r r r r r icultur icultur icultur icultur icultur al economal economal economal economal economy y y y y
In a recent analysis of today’s agricultural economy, The Economic Research Serviceissued a report that unveiled a new method of classifying agricultural producers.
1
Historically, agricultural producers were classified according to the value of whatthey produced. The new method, based on total household income, gives a clearerpicture of the variety of situations that exist in rural communities across the countrytoday by comparing the total household income of agricultural producers to thenational average for household income. Under this new method, agriculturalproducers are classified in one of the following eight classes, the first seven of whichare considered as “family farms
.
•
Limited resource farms
. Any small farm with gross sales of less than $100,000,total farm assets of less than $150,000 and total operator household income of lessthan $20,000.
•
Retirement
. Small farms whose operators report they are retired. This categoryexcludes limited resource farms operated by retired farmers.
2 AGRICULTURAL LAW UPDATE MARCH 2001
VOL. 18, NO. 4, WHOLE NO. 209 March 2001AALA Editor..........................Linda Grim McCormickRt. 2, Box 292A, 2816 C.R. 16, Alvin, TX 77511Phone: (281) 388-0155FAX: (281) 388-0155E-mail: lgmccormick@teacher.esc4.comContributing Editors: John C. Becker, Penn StateUniversity; Christopher R. Kelley, University ofArkansas; Roger A. McEowen, Kansas State University;Tracy Sayler, Fargo, N.D.For AALA membership information, contact WilliamP. Babione, Office of the Executive Director, Robert A.Leflar Law Center, University of Arkansas, Fayetteville,AR 72701.Agricultural Law Update is published by theAmerican Agricultural Law Association, Publicationoffice: Maynard Printing, Inc., 219 New York Ave., DesMoines, IA 50313. All rights reserved. First class postagepaid at Des Moines, IA 50313.This publication is designed to provide accurate andauthoritative information in regard to the subject mattercovered. It is sold with the understanding that thepublisher is not engaged in rendering legal, accounting,or other professional service. If legal advice or otherexpert assistance is required, the services of a competentprofessional should be sought.Views expressed herein are those of the individualauthors and should not be interpreted as statements ofpolicy by the American Agricultural Law Association.Letters and editorial contributions are welcome andshould be directed to Linda Grim McCormick, Editor,Rt. 2, Box 292A, 2816 C.R. 163, Alvin, TX 77511.Copyright 2001 by American Agricultural LawAssociation. No part of this newsletter may bereproduced or transmitted in any form or by any means,electronic or mechanical, including photocopying,recording, or by any information storage or retrievalsystem, without permission in writing from thepublisher.
BANKS FOR COOPERATIVES/
CONTINUED FROM PAGE 1
Cont. on page 6
CLASSIFYING/C
ont. from p. 1
had been repaid, the effect of the 1985amendments was to eliminate the au-thority of the FCA to make temporaryinvestments in the stock of the banks tomeet the emergency credit needs of theirborrowers, authority that had been con-ferred on the FCA’s Governor in 1971.In eliminating the FCA’s authority toacquire stock in the banks for coopera-tives, Congress made technical and con-forming amendments to the Act thateliminated the banks’ pre-existing ex-emption from state taxation when theFCA was a stockholder. Left standingwas a provision that only provided that“any and all notes, debentures, and otherobligations issued by such bank [of coop-eratives] shall be exempt, both as toprincipal and interest from all taxation... now or hereafter imposed by ... anystate ....” 16 U.S.C. § 2134.In the litigation before the Court,CoBank seized on the technical and con-forming amendments eliminating the lim-ited immunity from state income taxa-tion to argue that Congress, in strippingthis limited immunity from the Act, in-tended to render the banks immune fromstate taxation under the implied immu-nity doctrine.The court below, the Missouri SupremeCourt, had been persuaded by this argu-ment. It transmuted the congressionalsilence left by the technical and conform-ing amendments into the conclusion thatCongress, by not consenting to the states’taxation of the banks, had left it to theSupremacy Clause to cloak these federalinstrumentalities with the immunityCoBank was asserting. The United Su-preme Court, however, was unpersuadedwith CoBank’s argument.The Court rejected CoBank’s argu-ments on two grounds. First, the Courtwas unwilling to infer from the technicaland conforming amendments that Con-gress had intended to reverse its 50-yearhistory of permitting the banks to betaxed by the states except when the fed-eral government was a bank stockholder.Instead, reasoned the Court, Congresshad merely eliminated statutory languagethat became superfluous once the FCAwas barred from investing in bank stock.It pointedly noted that Congress couldhave retained but recast the eliminatedlanguage to leave an exemption fromstate taxation irrespective of governmentstockholdings. Rather than electing thisapproach, Congress deleted the provi-sion in its entirety. The Court opined thatthe resulting “silence [was] insufficientto disrupt the 50-year history of statetaxation of banks for cooperatives.” 2001WL 137461 at *5.Second, the Court observed that thebanks for cooperatives never have hadthe same statutory immunity from statetaxation that other Farm Credit Systeminstitutions have had. Specifically, whilefarm credit banks and federal land bankassociations have been favored by spe-cific provisions in the Farm Credit Actexempting certain capital holdings andthe income derived from them from taxa-tion by states and other governmentalbodies, banks for cooperatives enjoyedmore limited immunity, including thatconferred by the statutory provision re-pealed in 1985. The Court therefore con-cluded that “in light of the structure ofthe Farm Credit Act–and the explicitgrant of immunity to other institutionswithin the Farm Credit System–Con-gress’ silence with respect to banks forcooperatives indicates that banks for co-operatives are subject to state taxation.”
Id
. at *6.
—Christopher R. Kelley, AssistantProfessor of Law, University of Arkan-sas, Of Counsel, Vann Law Firm,Camilla, GA
•
Residential/lifestyle
. Farm opera-tors who report a major occupation otherthan farming.
•
Farming occupation/lower sales
.Farms with less than $100,000 of saleswhose operators report farming as theirmajor occupation. This class excludesthose farmers who fall into the limitedresource category described above.
•
Farming occupation/higher sales.
Farms with sales between $100,000 and$250,000 whose operators report farm-ing as their major occupation.
•
Large family farms
. Farms withsales between $250,000 and $499,999.
•
Very large family farms.
Farms withsales of $500,000 or more.
•
Non-family farms
. Farms organizedas non-family corporations or coopera-tives, as well as farms operated by hiredmanagers.After identifying this method of classi-fication, the Service examined eachcategory’s dependence on off-farm incomeand compared its family income to U.S.average household income of about$54,800. Excluding the
retirement
,
resi-dential lifestyle
and
non-family farms
categories, all of the other classes dependheavily on off-farm income to supportfamily expenses. The category
farming occupation/higher sales
is the first cat-egory that generates enough farm in-come to equal or exceed off-farm sources.The significance of this information isclear.First, the success of families in manysegments of agricultural production de-pends in large measure on non-farmsources.Second, when communities confrontthe question of preserving agriculture intheir midst, the first question to be askedshould be, “Which of these classes repre-sents the face of agriculture in the com-munity at the time?”The answer is likely to be that not onlyone, but several of the classes are repre-sented. With several different classespresent, the relative numbers within eachclassifications become important ele-ments. For example, the first class has adoubtful future and a large number ofproducers in the category raises the ques-tion of what will happen to them if theysuccumb to any of the commercial prob-lems they are likely to face? Will suchfacilities be converted to non-agriculturaluse? Will the land and buildings be con-solidated with another production facil-
MARCH 2001 AGRICULTURAL LAW UPDATE 3
The following is a report of an agricul-tural tour and the World Congress of International Federation of AgriculturalJournalists attended by Tracy Sayler inAustralia in September 2000.
With about 90% of its population ur-ban dwellers who live on the coasts, anda dependence on exports to move about80% of its agricultural production, it isnot surprising that biotechnology is asensitive issue in Australia. Governmentand industry leaders realize that Austra-lia could risk domestic and export mar-kets if genetically modified products arecommercialized. They also realize theycould risk their market share if Australiadoes
not
commercialize GM products.Some foods on the market in Australiacontain ingredients from GM crops. Soy-beans, canola, corn, potatoes, sugarbeets,and cotton oil have all been approved forfood use, and all except cotton oil areimported. Both industry and governmentplay a role in assessing the safety of GMfoods, with Australia’s New Zealand FoodAuthority (ANZFA, http://www.anzfa.gov.au) designated as thegovernment agency responsible for en-suring the safety standards fo all food,including GM food.Labeling regulationsLabeling regulationsLabeling regulationsLabeling regulationsLabeling regulationsOn July 28, 2000, the Australia NewZealand Food Standards Council (com-prised of health ministers from the Com-monwealth, New Zealand, and the Statesand Territories of Australia) agreed onnew labeling rules for GM goods. Thenew food standard will require the label-ing of food and food ingredients contain-ing novel DNA and/or novel protein in thefinal food. It also requires labeling of foodand ingredients in which the food hasaltered characteristics. Genetically modi-fied ingredients within a food will beidentified in the ingredients panel of thelabel. The new standard allows any oneingredient in a food to contain up to 1% ofGM material when its presence is unin-tended.Exempt from these requirements arethe following:
·
Highly refined food from which therefining process removes novel geneticmaterial and/or novel protein;
·
Processing aids and food additives,except if novel genetic material and/ornovel protein are present in the finalfood;
·
Flavors that are present in a concen-tration less than or equal to 0.1% in thefinal food; and
·
Food prepared at point of sale (suchas restaurants and hotels).To give food manufacturers and im-porters time to ascertain the status oftheir products and revise their labels, thenew standard is scheduled to take effectin September 2001. However, consumerswill notice the gradual introduction oflabels on food containing GM ingredientsduring the interim. Some manufacturersmay decide to introduce labels indicatingthat food ingredients have been obtainedfrom non-GM sources.Australia and New Zealand will haveone of the most rigorous and progressivelabeling requirements for GM foods inthe world. In fact, the requirements areregarded as even slightly more stringentthan those of the European Union, previ-ously the benchmark for GM labelinglegislation. Japan has a threshold of 4%GM content, above which labeling is re-quired. The United States and Canadado not require the labeling of GM foodsthat have the same properties and char-acteristics of conventionally-producedcounterparts.While industry may be able to absorb apart of the new labeling costs, some costsmay be passed on to consumers. In addi-tion, consumers searching for GM-freefoods may have to pay a premium to coverthe manufacturer’s expense in testingfood ingredients and in complying withthe new labeling rules.Biotech R&D down underBiotech R&D down underBiotech R&D down underBiotech R&D down underBiotech R&D down underCommercial applications of biotech-nology in Australian agriculture are nowlimited. Currently in the land down un-der, only genetically modified cotton andcarnation plants are approved for com-mercial production. In 1999, Australiahad less than 1% of the global transgeniccrop, with an estimated 100,000 hectares(247,000 acres) of insect-resistant cot-ton, and small areas of carnations geneti-cally modified for better color and longer“vase-life.”However, biotech research and devel-opment is being aggressively pursued invirtually all facets of Australian agricul-ture. Both commercial companies andpublic research organizations are con-ducting transgenic crop research anddevelopment in Australia. Much of thepublic research is being conducted byAustralia’s Commonwealth Scientific andIndustrial Research Organization(CSIRO,http://www.csiro.au), which issimilar to the Agricultural Research Ser-vice of the US Department of Agricul-ture.Over 100 field trials of transgenic cropsand 80 extensions to those trials havetaken place in Australia. Herbicide resis-tance is the trait most frequently tested,followed by insect resistance, diseaseresistance, product qualities, agronomicproperties, and DNA markers. Cottonand canola are the most researchedtransgenic crops in Australia, togetheraccounting for over half of the trials andextensions.Gene technology is also being appliedby CSIRO in other unique research ar-eas. Some examples:Livestock vaccines—Gene technologycreates new opportunities for fightingviral and bacterial infections. For ex-ample, CSIRO’s Australian AnimalHealth Laboratory is using gene technol-ogy to insert the gamma-interferon geneinto a harmless virus, which when givento the animal, would cause a strong im-mune reaction and help fight infection.Sheep production—CSIRO research-ers are using gene technology to improvewool growth and quality, produce leanermeet, and protect sheep against the blow-fly, an insect that costs the industryaround $300 million ($AUD) a year and“causes the animals great pain and suf-fering,” according to CSIRO. In the blow-fly research, CSIRO scientists are work-ing toward transferring a tobacco en-zyme gene into sheep skin cells. Theenzyme dissolves chitin, the main struc-ture on an insect’s skeleton and gut.Transgenic sheep will secrete the en-zyme in their sweat. When blowfly mag-gots feed on the sweat, the enzyme shoulddissolve the lining of their gut, causingdeath.Aquaculture—CSIRO scientists aredeveloping new diagnostic tests to detectdiseases that could affect Atlantic salmon,trout, and prawn farms. Additionally,they are developing better ways of intro-ducing genes into invertebrates like in-sects and shellfish to improve food pro-duction, safeguard the environment, andprotect humans against insect-borne dis-eases.Pesticide breakdown—Many chemicalpesticides do not decompose easily in theenvironment. As a result, they tend toconcentrate in the food chain and mayaffect the health of humans and otheranimals. Overuse of pesticides kills mostpests, but leaves a few that are able toresist the effects of these chemicals. Theoffspring of the remaining ‘resistant’ pestsare also unaffected by the chemicals.Research shows that resistant insectsproduce enzymes that degrade pesticidesinto harmless substances. CSIRO ento-mologists are working to use these en-zymes in bioremediation efforts to re-move pesticide residues from the envi-ronment. Initial work shows that theenzymes degrade organophosphates un-der conditions similar to those in thenatural environment. CSIRO has recentlysigned an agreement with an Australian
Gene tecGene tecGene tecGene tecGene technolog hnolog hnolog hnolog hnolog y in the land doy in the land doy in the land doy in the land doy in the land down under wn under wn under wn under wn under
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