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The following Questions & Answers provide information about the Livestock and Seed Program’s compliance activities related to the Livestock Mandatory Reporting Act of 1999 (Act).
Q: What is the purpose of the Act?
A: The purpose of the Act is to: provide information on pricing, contracting for purchase, and supply and demand conditions for livestock, livestock production, and livestock products that can be readily understood by producers, packers, and other market participants, improve the price and supply reporting services of the Agricultural Marketing Service (AMS), and encourage competition in the marketplace.
Q: Who is required to report market data under the Act?
A: Packers who annually process more than 125,000 cattle; 100,000 hogs, or a person that slaughtered an average of 200,000 head of sows, boars of combination thereof per year during the immediately preceding 5 calendar years; or 75,000 lambs are required to report market data under the Act. Importers who annually import an average of 2,500 metric tons of lamb meat are also required to report.
Q: What information are packers and importers that are subject to the Act required to report?
A: Packers are required to report the details of all transactions involving purchases of livestock (cattle, swine, and lambs), the details of all transactions involving domestic and export sales of boxed beef cuts, sales of boxed lamb cuts, and sales of lamb carcasses. Importers are required to report information concerning their domestic sales of imported boxed lamb cuts.
Q: What are the penalties for violations of the Act?
A: The Act specifies what constitutes a violation such as failure to report the required information on time or failure to report accurate information.
The section on enforcement provides for a civil penalty of up to $10,000 for each violation and provides for the Secretary’s issuance of cease and desist orders. The Act also provides for notice and hearing of violations before the Secretary, judicial review, issuance of an injunction or restraining order, and establishes a civil penalty for failure to obey a cease and desist order.
Q: Who oversees compliance activities?
A: There are two branches of the Livestock and Seed Program that share in the duties of fulfilling the requirements of the law related to compliance: Livestock and Grain Market News (LGMN) and Audit, Review, and Compliance (ARC).
The LGMN Branch is responsible for the collection and generation of market reports from information supplied by the packers under the provisions of the Act. LGMN also makes the determination on whether actions by packers are in compliance with the regulation and LGMN policies.
The ARC Branch is responsible for conducting audits of packers covered under the Act. ARC gathers factual information and presents it to LGMN so that a determination of the packer’s compliance can be made to assure that information supplied is in accordance with the regulation and LGMN policies.
Q: How often are audits conducted?
A: Each covered packer is audited a minimum of once every six months. The majority of these audits encompass the review of randomly-selected lots selected by ARC through statistical sampling. ARC may look at any supporting documentation the company has pertaining to information submitted under LMPR. Most audits also include the review of all of the packer’s transactions (purchases and sales) for a randomly selected day, which is selected by ARC through statistical sampling, except for those packers for which a full day audit is not appropriate given the nature of the information that they report to AMS (e.g., packers that slaughter primarily hogs owned by their parent corporation). In addition, the LGMN Branch Chief may request an audit of a specific issue if LGMN has reason to believe that a packer may not be correctly reporting the required information.
Q: What happens during the audit?
A: At the beginning of each audit, the auditor interviews the appropriate personnel to discuss any changes to the packer’s operations or business practices that have occurred since the previous audit. In addition, the status of any unresolved non-compliances from prior audits is also reviewed and discussed. The auditor reviews the LMPR submissions of a full day’s transactions from the packer. To do this, the auditor audits the kill summary and sales invoices and/or bills of lading as applicable for a randomly selected one-day period and compares that to the information that was submitted through the LMPR system to determine if all transactions covered under the Act have been reported to AMS. For lots that were not reported to AMS, the packer must provide supporting documentation that shows why the lots were not covered under the Act. If LGMN has requested an audit of a specific issue, the auditor will search for evidence that either supports or refutes LGMN’s beliefs in the packer’s level of compliance. The ARC Branch utilizes the International Organization for Standardization (ISO) 19011:2002 guidelines for quality and/or environmental management systems auditing to provide a format for evaluating program documentation to ensure consistent auditing practices and promote international recognition of audit results. For further information see the LMR Compliance Verification Program General Programs and Procedures – PDF.
During the review of randomly-selected lots, the auditor reviews and evaluates documentation supporting the ARC selected data to verify compliance with the Act and regulation including: original contracts, agreements, receipts and other records associated with any transaction relating to the purchase, sale, pricing, transportation, delivery, weighing, slaughter, or carcass characteristics of all livestock, and any other records necessary or appropriate to verify the accuracy, timeliness, and completeness of the submitted information. In reviewing the data under both types of sampling protocols, the auditor will also determine whether there are any issues which appear to be reoccurring non-compliances, which could prompt LGMN to pursue legal action against the packer.
Q: Are there different levels or types of non-compliance?
A: The ARC Branch reports all findings to LGMN who determines if there were any non-compliances committed by the packer. If there are non-compliances found, they are assigned a level of designation by LGMN, which indicates their severity. These levels are as follows:
- Level 1: Packer does not submit information or submits incorrect information that likely will affect the accuracy of published reports. For example, a packer continually submits the required information in an untimely manner.
- Level 2: Packer does not submit information or appears to have inadvertently submitted incorrect information that could affect the accuracy of published reports. For example, a packer reports transactions under the wrong purchase type code.
- Level 3: Packer does not submit information in compliance with applicable rules and regulation, but their submission appears to have at most an insignificant affect on the accuracy of published data. For example, a packer reports purchases made at a livestock auction, which are not covered under the Act.
- Level 4: Information submission errors normally caused by electronic or human error, usually a one time occurrence but will remain under observation to determine if a systematic pattern develops. For example, a packer inadvertently submits the wrong number of animals involved in a transaction.
Q: What steps are taken to ensure compliance during an audit?
A: If any non-compliance is discovered during an audit, the auditor notifies LGMN of that non-compliance in the audit report. LGMN staff will contact packer management to clarify or rectify situation and agree on a time frame to resolve the issue.
Q: What happens if non-compliances are not corrected?
A: If a packer is in violation of the Act and does not implement corrective action, an official "warning" letter is prepared by legal counsel and hand delivered to packer management, explaining the non-compliance issue and the required corrective action. If the packer continues to violate the Act, enforcement of civil penalties up to $10,000 for each offense will be initiated by legal counsel.
Q: What can I do if I believe that the price for my transaction is not represented in the LGMN published report for the applicable reporting period?
A: The individual should contact LGMN and be prepared to provide all of the pertinent information regarding the transaction, including the actual settlement sheet if possible. Within the confines of the confidentiality provisions of the Act, which prohibit USDA from releasing the identity of any person, LGMN will conduct an investigation to determine if the livestock were reported by the packer as required. In most cases, the producer is unable to locate the price information representative of their sale in a published report because of the specific definitions of the purchase types found in the Act. For example, a producer may believe that the purchase type was negotiated when it is actually a formula purchase based on the definition found in the Act.
Q: Where can I find more information about Livestock Mandatory Reporting or the audit and review procedures?
A: For more information, please visit the Livestock Mandatory Reporting Page or Livestock and Seed Program, Audit, Review, and Compliance page. This page also contains key contact information, addresses, and telephone numbers.
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