A Swine Contractor obtains swine under a swine production contract for slaughter or sells it for slaughter by another.
- Swine Production Contracts
- Swine Contract Provisions
- Swine Production Contracts Provisions of the Packers and Stockyards Act Frequently Asked Questions
Swine Contractor Responsibilities
The actions below are some basic responsibilities for swine contractors. Review the Packers and Stockyards Act, 1921 (Act), as amended and supplemented, and the Regulations issued there under, for a complete list of legal responsibilities.
Maintain Accurate Scales
All scales used by those subject to the P&S Act to weigh livestock, livestock carcasses, or feed for the purposes of purchase, sale, acquisition, payment, or settlement, must be installed, maintained, and operated to ensure accurate weights. Follow the applicable requirements in the National Institute of Standards and Technology (NIST) Handbook 44, "Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices." You must have a competent agency test the scales you use for accuracy at least twice during each calendar year. The first test must occur between January 1 and June 30. The second test must occur between July 1 and December 31. You must have a minimum of 120 days between these two tests. Except when you use such scales on a limited seasonal basis (during any continuous 8-month period) for purposes of purchase, sale, acquisition, payment or settlement. In that case, you may use such scales within an 8-month period following each test. File the certification form from the competent testing agency showing results of the required test with the PSD regional office covering your State. Such scales must be equipped with a printing device that will record weight values on a scale ticket or other document. Any scale known to be inaccurate may not be used.
Use Fair Business Practices
It is unlawful for any swine contractor to engage in or use any unfair, unjustly discriminatory, or deceptive practice or device.
Maintain Adequate Records
Every swine contractor must keep the accounts, records, and memoranda necessary to disclose fully and correctly, all transactions involved in his/her business. This includes the true ownership of the business. The records must be maintained for two full years, or longer if instructed by the Administrator.
Permit Inspection of Business Records and Facilities
Every swine contractor, upon proper request, must permit authorized representatives of the Secretary of Agriculture to enter their place of business during normal business hours and to examine records pertaining to its business subject to the P&S Act.
Provide Information About Business
Every swine contractor, upon proper request, must give the Secretary of Agriculture or his/her authorized representatives, within a reasonable time (specified in the request), any information about its business, in writing or otherwise, and under oath or affirmation, which may be required in order to carry out the provisions of the P&S Act and Regulations.
Disclose Producer Right to Cancel
Each swine contractor must disclose in its swine production contracts the swine production contract grower's right to cancel the contract; the method in which the grower may cancel the contract; and the deadline for canceling the contract. Swine production contract growers have until the later of (a) the date that is three business days after the date when the swine production contract is executed, or (b) any cancellation date specified in the contract to mail a cancellation notice to the swine contractor.
Disclose Additional Capital Investments
Each swine contractor must disclose on the first page of its swine production contracts a statement identified as "Additional Capital Investments Disclosure Statement", which conspicuously states that additional large capital investments may be required of the swine production contract grower during the term of the contract. ' Note: The provision related to disclosure of additional capital investments in Section 208 (b)(1) of the P&S Act (7 U.S.C. 197a) applies to any swine production contract entered into, amended, altered, modified, renewed, or extended after June 18, 2008.
When determining whether a requirement of additional capital investments over the life of a swine production contract constitutes a violation of the P&S Act, the criteria the Secretary of Agriculture may consider includes, but is not limited to, whether:
- A swine contractor failed to give a swine production contract grower discretion to decide against the additional capital investment requirement.
- The additional capital investment is the result of coercion, retaliation or threats of coercion or retaliation by the swine contractor.
- The swine contractor, absent the occurrence of a catastrophic or natural disaster, or other emergency, such as unforeseen bankruptcy, intends or does substantially
- Reduce/end operations at the slaughter plant or processing facility or
- Reduce/end production operations within 12 months of requiring the additional capital investment.
- The swine contractor required some swine production contract growers to make additional capital investments, but did not require other similarly situated swine production contract growers to make the same additional capital investments.
- The age and number of recent upgrades to, or capital investments in, the swine production contract grower’s operations.
- The cost of the required additional capital investments can reasonably be expected to be recouped by the swine production contract grower.
- A reasonable period to implement the required additional capital investments is provided to the swine production contract grower.
- Equipment changes are required with respect to equipment previously approved and accepted by the swine contractor, if existing equipment is functioning as it was intended to function, unless the swine contractor provides adequate compensation incentives to the swine production contract grower. Note: The regulations in this part, when governing or affecting contracts, shall apply to any swine production contract entered into, amended, altered, modified, renewed or extended after February 7, 2012.
Use Required Forum for Resolving Disputes and Choice of Law
The forum for resolving any dispute among the parties to a swine production or marketing contract that arises out of that contract must be located in the Federal judicial district in which the principle part of the performance takes place under the contract. A swine production or marketing contract may specify which State's law is to apply to issues governed by State law in any dispute arising out of the contract, except to the extent that the law of the State prohibits doing so in which the principal part of the performance takes place under the contract.
Permit Grower to Decline Arbitration
Any livestock contract that contains a provision requiring the use of arbitration to resolve any controversy that arises under the contract must contain a provision disclosing that a swine production contract grower, prior to entering the contract, may opt out of the arbitration provision. Any swine production contract grower that opts out of an arbitration requirement prior to entering the contract has the right to seek to resolve any controversy that may arise under the contract, if, after the controversy arises, both parties consent in writing to use arbitration to settle the controversy. Any action by or on behalf of a swine contractor with the intent or effect of limiting the ability of a swine production contract grower to opt out of the arbitration provision is an unlawful practice under the P&S Act. Note: The provisions related to arbitration in Section 210 (a), (b), and (c) (7 U.S.C 197c) apply to any contract entered into, amended, altered, modified, renewed, or extended after June 18, 2008.
Production contracts that require the use of arbitration must include specific language on the signature page that allows the swine production contract grower to decline arbitration. See regulation 201.218 for the mandatory language.
- The contract discloses sufficient information in bold, conspicuous print describing
- all the costs of arbitration to be paid by the swine production contract grower,
- the arbitration process, and
- any limitations on legal rights and remedies in such a manner as to allow the swine contract production grower to make an informed decision on whether to elect arbitration for dispute resolution.
- Provisions in the entire arbitration process governing the costs and time limits are reasonable.
- The swine production contract grower is provided access to and opportunity to engage in reasonable discovery of information held by the swine contractor.
- Arbitration is required to be used to resolve only disputes relevant to the contractual obligations of the parties.
- A reasoned, written opinion based on applicable law, legal principles and precedent for the award is required to be provided to the parties. Note: The regulations in this part, when governing or affecting contracts, shall apply to any swine production contract entered into, amended, altered, modified, renewed or extended after February 7, 2012.
Permit Opportunity to Remedy Breach of Contract
When determining if a swine contractor has provided a reasonable period for a swine production contract grower to remedy a breach of contract that could lead to termination of a production contract, the criteria the Secretary of Agriculture may consider includes, but is not limited to, whether:
- The swine contractor provided written notice of the breach of contract to the swine production contract grower upon initial discovery of that breach of contract if the swine contractor intends to take an adverse action, including termination of a contract, against the swine production contract grower based on that breach of contract by the swine production contract grower.
- The notice includes:
- A description of the act or omission believed to constitute a breach of contract, including identification of the section of the contract believed to have been breached;
- The date of the breach;
- The means by which the swine production contract grower can satisfactorily remedy the breach, if possible, based on the nature of the breach; and
- A date that provides a reasonable time, based on the nature of the breach, by which the breach must be remedied.
- The swine contractor took into account the swine production contract grower’s ongoing responsibilities related to the raising and handling of the swine under their care when establishing the date by which a breach should be remedied.
- The swine production contract grower was afforded adequate time from the date of the notice of the alleged breach to rebut the allegation of a breach. Note: The regulations in this part, when governing or affecting contracts, shall apply to any swine production contract entered into, amended, altered, modified, renewed or extended after February 7, 2012.
Note: These criteria do not limit swine contractor’s rights under a contract or agreement where food safety or animal welfare is concerned.