the program is unconstitutional under the fifth amendments takings clause. looking at argument this morning in case 14275 horne versus department of agricultural. >> mr. chief justice and may it please the court. this case does involve some important principles in the lives of marvin and lauren horne and hundreds of mall california raisin growers will be profoundly effective. this is an administrative enforcement proceeding brought by the department of agricultural against my clients demanding the relinquishment of funds. under their -- in the particular

facts of this case the economic situation are somewhat different that are ordinarily true in this industry because as handlers the hornes actually assumed the full financial responsibility for the raisins that were not turned over to the department of agricultural. the producers in this case were fully paid for their raisins. this is a factual finding to be found in the judicial officer's opinion at 66 a of the appendix to the petition. the hornes paid the producers for their raisins corn to the judicial officer, those raisins became part of the inventory of the hornes. when the risen administrative committee which i will refer to as the r.a.c. came after the raisins it was the hornes and the hornes only who bore the economic burden of this taking. >> i thought the growers were

paid only for the volume that they were permitted that was permitted -- the permitted volume and that they were not paid for what goes in the reserve pool? >> justice ginsburg that is true in the ordinary coarse. that was not true in this particular case because of the unusual business model of my clients. these producers are paid for all of their raisins. >> are you objecting to the volume limitation or is it just that the -- the reserve pool that you find -- >> we believe that a volume limitation would be a use restriction that might possibly be challengeable under the penn central test but not a per se taking. in this case the government the r.a.c. which is an agent of the department of agricultural

takes possession, ownership of the raisins. is it that aspect of the case -- >> it is puzzling. if you are not challenging the volume limit itself you can't sell more than 60% of your crop. >> that's correct. >> and what happens to the rest of it? not going to be able to feed your family on the rest of the 40%. >> in the ordinary case, the reserve percentage which in one case is 37% and was 30% in the other case. 47% is -- is handed over to the raisin administrative committee. >> but if it wasn't -- if we just had a volume, you cannot sell more than "x" amount. then i take it that the grower would get nothing. nothing at all, at least with this reserve pool there is the

possibility of getting some money. >> well, it all depends the way volume controls generally work is that the owner of the produce is permitted -- they have to hold back a certain amount in a reserve and permitted to sell that reserve as the market conditions continue. in this case of course, the r.a.c. sold the raisins and in some cases above the field price. there was a market for the raisins, so i would assume that volume controls under these economic conditions might have left these particular people better off than under the current system. >> so what you're complaining about is the administrative expenses? i still don't understand why this makes this a penn central case as opposed to a per se taking? you have given up on this being a penn central case? >> we have never claimed a penn

central case. >> so basically you see a nexus between the regulation and its purpose? >> we do. but more fundamentally this is an actual transfer of the raisins themselves to the government. this is -- >> how is this different than leonard? >> well, leonard involved oyster shells, which are owned by the state. they're wild animals. they're the property of the state. and the oystermen had no property interest in them other than what the state chose to license them to harvest. >> is that really true mr. mcconnell, when the fishers took the oysters including the shells from the bay and other waters they could sell the oysters why weren't the oyster shells theirs at their point? >> they have whatever property interest the state of maryland provided for them. and the state of maryland

withheld the 10% of the oyster shells for essentially fertilizing the -- >> i would have thought as soon as they bring the oysters out of the bay and haul their catch to shore what they haul to shores is theirs? >> except for the 10% that the state reserved, yes. >> why wouldn't the same be true as to raisins? >> because raisins are not wild animals, even if they're dancing and they did not originally belong to the federal government. >> so you think that leonard is an animals case as opposed to a -- you know, the state can tax your property case? >> yes, i do. >> they called it a tax. >> they did also call it a tax and i'm perfectly happy to address whether this is a tax.

because under this court's standards for criteria for determining a tax this certainly is not one referring to the criteria in the nfib case this is not in the internal revenue code or collected by the internal revenue service there is no tax authorized by congress. the proceeds of the tax do not go into the general treasury. this is not a tax. >> but it didn't happen that way in leonard either. what the court was basically saying was the government could do this because this is a good in commerce. as long as it didn't mean the penn central test that there is some nexus between the government's goal and the regulation, then it's okay. now there they used it to fertilize oyster ponds or refertilize the oysters. here they're doing it to

maintain prices and giving you whatever is is left over on the reserve. >> the fact of the matter is that the oysters belonged to the state of maryland and when the state of maryland decides to allow fishermen to harvest the -- >> can you tell me where in leonard it is discussed? >> i'd be happy to file a supplemental brief with the maryland citations indicating the oysters belonged to the state of maryland. >> i thought that -- what the constitution required for a taking was just compensation not a reasonable nexus to a good policy. am i wrong about that? >> you're not wrong about that. >> i didn't think so. >> underlying the government's briefs in this we can ask what their position is or you can characterize their position if your choose.

since we could do this other ways, what difference does it make? do you understand that to be their -- an underlying premise in their argument or is that unfair on my part? >> well they certainly say that from time to time. in this court two years ago in koontz rejected arguments of that sort. but in fact there is a fundamental difference between a volume control which is present for a number of agricultural products versus the taking because in this case the government literally takes possession of the raisins. it can use the raisins as collateral as a loan. it can give the raisins away or sell the raisins. >> you are attacking this reserve arrangement and the possession, the government's possession of the raisins themselves. and as far as i have heard so

far you are not attacking the volume limit, you cannot market more than "x" amount. why did you not ask for an exemption from the reserve pool. so what you're trying to do now is to get rid of the volume limit as well. >> in this particular program there is no separate volume control in the sense there is no regulation that tells producers or handlers how to use or sell raisins. they are told to set aside raisins and give them to the government. here there is a taking -- >> but the part that isn't given to the government. suppose we just -- couldn't you have asked to excise that part of it and leave the limit on the amount to be marketed. there is a division between what goes in the reserve and what can be marketed. >> the way this case arose is

the department of agricultural came after my clients. this is not our lawsuit. the department came after our clients. >> is it counter claim? >> it's a defense. the department says give us either raisins or monetary equivalent and we say that's not constitutional. >> if there was a taking would there be an obligation on your part to propose an alternative to the taking? the government comes and takes your property can't you just deny the taking? >> we do not and i don't know that any alternative ways would be -- >> since my question is it goes on from this. maybe the answers is well just don't decide that. look, i assume for the moment for arguments sake i have

raisins in my basement in this program. and the government comes with a shovel and burlap sacks and takes the raisins. i would say, sounds like a taking to me. >> me too. >> and the constitution doesn't forbid takings. they demand compensation. the government could argue look at this program. it's a big program. what it does is give raisin farmers at the public expense more money. so if in fact you don't want us to take your raisins, all right fine. but would it be no program if everybody said that. so we have a rule against free riders. now we'll give you what it cost you to take your raisins. what it cost you is in fact the difference between what you receive given the program and what you would receive without the program. that difference works in your favor. it give use money.

it doesn't take money. so there is no compensation due. if we were to have compensation you should pay us, the government. so how are you going to get by that part? and if you can't get by that part how are you going to avoid paying the fine? we have to look at the taking part and how you get money or don't have to pay the fine. i would appreciate just the explanation. >> i would love to. there is both a conceptual and practical response. let me give the practical response first. by the secretary's calculation the price of raisins was $63 per ton higher with the volume involves than it would have been in an unregulated market. the field price was $810 per

ton. taking away 30% of their raisins does not end up with the -- with my clients better off as a result of the program. quite the contrary. they lose money. we have the calculation in our -- >> i don't want to interrupt you but isn't the response that -- the price that you just quoted is because of this program. and it's circular or -- >> by the secretary's own calculations, $63 of that $810 is attributable to the volume controls in the program. only $63. >> except weren't were told that the demand for raisins is inelastic. if you glut the market you're going to have what happened before the r.c.a.? you're going to have prices dropping. that's the purpose of free

competition isn't it? >> under today's conditions the elasticity is not as enormous as it would need to be for this to be a profitable -- >> but you haven't paid a reserve in years now. >> when i say today what i mean is the -- >> one of your arguments is -- >> now the conceptual point is that this is a per se taking. and it's -- if there were benefits such as i don't believe there were -- if there were it would go to whether there is implicit in kind compensation for the caking which would go to the question of taking. implicit in kind compensation is a complicated matter. there is a split all over the country on that. i don't think we want to get into whether this would be a special benefit.

>> do you have an objection to my writing, it's a take but the constitution forbids take without compensation. programs can work badly. sometimes they are counterproductive but if this is working well that's what happens. so we send it back to the court to see whether the program worked well or make your client better off what rules do we follow. >> i think not. but i'm close to there. if this were an imminent domain proceeding then the lower court would determine if there were implicit in kind compensation if it was inverse compensation proceeding, possibly the same. but this is an enforcement action. it is specifically guided by the

regulations in the seven cfr. and under those regulations we know exactly what takes place. and implicit in kind contribution is not provided for in those regulations. what is provided for in those regulations if reserve raisins are not handed over to the r.a.c., the handler must multiply the number of raisins by the field price and that is it. and that is also the measure of the value of the raisins. so if they take that the compensation is exactly that. the regulation -- and the broader principle here is this is not a program which is designed to provide compensation. the government almost concedes this. this is not -- this is not like getting land for a post office where the government intends to pay.

this is more like a program like a kaiser aetna or some of the others where if it is a taking the government has no intention of paying compensation. that is not the kind of program it is. and -- may i just -- in cases where there's a taking and the program does not contemplate compensation the standard judicial remedy for that is to forbid the taking -- >> can we get back mr. mcconnell to whether is it a taking point. and i've just been trying to think about whether your argument would apply to other kinds of programs and how it would apply to other kinds of programming. how about just programs where the government says give us -- produce records for us. i'm sure there are a lot of programs like that in the world. there is something intuitive about your saying the government

is asking us to turn over stuff. it seems that the government asks people to turn over stuff all the time in the form of records. how would that fair under your argument? >> if the records -- if what the government is asking for is information, this is not going to be a taking. if the records are themselves of historical value as they were in nixon vs. -- >> i don't know of their historic value. they are physical objects in the same way the raisins are physical objectance the government wants records. >> the government does not take permanent position of records. if i'm in an irs audit and they ask for records. i show them the records, they see the information it's not a taking. >> you're saying that the government couldn't ask you to deliver records to them? >> i did not say that. they can ask me to do that.

and it is not a taking unless they've taken a permanent possessory interest. if they sell the records the way they sell the -- >> they're keeping the records. >> if they're keeping the records forever i'm not sure but i doubt very much that would be a take. again if the value of the records is the information which is what i assume it is in a regulatory program we're not talking about actual physical -- >> there are cases on custodial -- i think it's a taking if it's too long. i think we have said that or other courts have said that. the government can keep it only so long as -- you have a valuable diamond ring and the

government keeps it but only for so long as -- >> i think there are complicated sets of rules dealing with contraband and so forth but this is far afield from raisins which are a -- which are a valuable piece of property which -- >> i'm trying to understand why it's far afield and what it's far afield from. you said information is no problem but people have property interests in information all the time. and if the government says you have to give us that information, which counts as property why is that not subject to your rule? >> information can be property when it's intellectual property for example trade secrets can be property. i don't think ordinary records such as the irs demands from taxpayers demands as a taking. >> where we said the turning

over of trade secrets, which is a property you've just admitted that, for the privilege of selling other commodities the pesticides, was okay. wasn't a taking. how do you deal with that case? >> there's broad language in that case which this court cut back upon in nolan versus california court commission. in nolan, the court held that mon santo could not stand for the proposition that is an affirmative benefit to someone simply to allow them to use their property in an ordinary sense. there has to be an affirmative government grant of a benefit for the condition. >> getting $63 more a pound for what you sell seems like a significant benefit. >> they are not -- the $63

results from volume controls. that does not require a take. the taking itself is of absolutely no value to the producers or anyone else other than those who receive the export subsidies from the sale of the raisins they are the only ones who benefit from the actual taking. >> but you couldn't do it. you would have a product that would be valueless except for that which you could eat at home. but you didn't intend to eat it at home because you gave it up for sale. if they gave you the raisins would you be able to export them and get the government subsidy? >> if they -- my clients are not actually in the export business. if the -- if my clients were selling raisins for export they would be entitled to receive the export subsidy. but that's not the business that they're in. >> my point is just you couldn't

otherwise sell this commodity. if all they did was put in the house and say to the producers sell 60% this year what would you do with the raisins? they just sit there? >> the way other programs with volume controls work is there is an initial reserve and as market conditions develop and more information is available, the owners of the product are permitted to release more and more into the market. and in these particular -- >> the logic goes the other way. >> that would be a different -- that would certainly be a different case. if it went completely the other way, it could well be that the owners of the raisins receive no money at all. but it's still -- it's still a restriction on their use. the raisins haven't been taken from them. in this case, the raisins are actually taken from them and the government sells them.

in fact one of these years the government was able to sell them for more than the field price. >> the curly cue on this there is what we do about this fine. and the reason that -- it's a curly cue on the case. but think of an imaginary plan -- i think i'll figure it out myself. i'd like you to reserve it. >> if there are no further questions i will reserve the remainder of my time for rebuttal. >> thank you. >> mr. chief justice and may it please the court. regulating the commercial marketing of a fudgeable agricultural product a regulatory program that was established with producer approval and is established for their benefit. it is cooperative program among the secretary producers and handlers. the raisins are not put into the

program for the benefit of the government. they are put into the program for the benefit of producers and they enter the stream of commerce. a producer is affected by these -- >> these plaintiffs are ingrates, you're really helping them. it's their benefit. and they wanted this, didn't they? >> these petitioners do not want the program but the program was established on the premise it is -- >> it's one little feature of an overall program. that feature happens to be the taking of raisins. you can have a lot of features. there's no objection to having many features but where one is a taking you have to justify it by just compensation. >> the question is whether it is a taking and we believe it's not. >> you used to say it's not a take if it involves personal property only real estate. the government has abandoned that position. >> that has not been our

position. we have not argued that personal property is not subject to the just compensation clause such that if the government came in and took someone's car -- >> or raisins. >> the government has not taken the raisins. if i could set this up and explain how it operators. it's only when the producer has committed the raisins to the stream of commerce. they have been put -- they have been put into the stream of commerce, they are turned over to the handlers. >> the government can prevent you from putting something into the stream of commerce can charge you for putting something into the stream? >> i think the government can attach reasonable conditions on entering the stream of -- >> including taking? >> that is the lesson of monsanto. >> it's an unconstitutional condition. take without compensation is an

unconstitutional condition for putting something into the stream of commerce. >> that analysis would apply if there was a taking on the nolan-dolan -- >> there are examples in the briefs that are startling. could the government say to a manufacturer of cell phones you can sell cell phones but every fifth one you can give to us or a manufacturer of cars you can sell cars in the united states but every third car you have to give to the united states. >> i think that would present a very different question. >> why would it be different? >> this is part of a comprehensive regulatory program that it isn't just acquiring -- >> you say if the government took all gm's cars it would be okay but just not a third? >> we are not saying that at all. if i could just -- just before you do the rationale. the government can come up with a rationale easily.

you say cell phone providers benefit greatly if there is a broader cell phone market. so we're going to take every fifth one and give it to people who cannot afford a cell phone and that will help cell phone manufacturers because more and more people will have them and want them. that's the same rationale you are applying here. this is for the good of the people whose property was taken. >> well, these programs go back to the 1930s when the agricultural industry in this country was in serious trouble and particularly in california prices were below costs of production. >> and you can do what you've done in most other marketing orders which is not take the raisins and say you can only plant 63% of your acreage this year or only produce 28 tons. that's how much of them work and most of them thereby are analyzed under penn central. this is different because you come up with the truck and get the shovels and take the raisins

probably in the dark of night. >> that is not what the government does. the way the order operates is that the producer submits the raisins to the handler. the handler divides them into two categories. the handler is required by the order to maintain and separate the reserve raisins but they are separated for later sale. they don't go to the government. they are separated for later sale. >> what do you mean they don't -- does not the government own them? do you deny that the government owns them? >> for purposes of this case we concede that the government gets legal title but that doesn't mean that the government has the entire interest in the raisins. the government has legal title so that it may -- we will assume for purposes of this case -- so that the government can -- or the committee it's not the secretary of agriculture, the

committee can then sell the raisins. the proceeds of those sales are pooled and distributed back to the producers. >> how much from those sales did these petitioners acquire in the two years at issue here? how much money was given back to them? >> in one year, $272 per ton and in the other year there were no other proceeds back. because the cost of administering the reserve program exceed -- there was no net proceeds. >> over the history of the program that starts in 1949 right? >> yes. >> in how many years while the program is in effect was there a distribution to the growers? >> i do not know that how many years but a great number of years and in fact the three years leading up to this particular time, one of the

years here was $47 million was returned in the prior years it was 50 some million and another 30 some million. so the experience has been that there typically has been -- >> i, too am troubled about his every fifth telephone or whatever, every fifth car or every fifth telephone you have to give to the government. is that a taking or isn't it? and what's the basis -- what's distinguishes it from -- >> this is a comprehensive governmental program and it governs quality. it governs timing of sales and it's important to recognize that's all that is going on here. the reserve raisins are set aside by the handler after the producer has voluntarily turned them over they are set aside for later sale.

petitioners concede in their brief that the government can regulate the when the manner and channel of sales. that's exactly what the she serve program does. they are turned over to the handler, the handler sets them aside in reserve. >> this is a historic quirk you have to definiteend. you could achieve this through volume limitations that doesn't require a physical taking. in the history of the new deal this was set up definitely. we are not going to jeopardize the marketing the agriculture department marketing ordering regime. it better be the department of agriculture that takes them and not the committee. >> we're not saying the committee is not the government. what we're saying is that the

operation of the program is for the producers betterment. >> i'm having trouble with the same thing. i agree so far with what the chief justice said. go back to the new deal. you can, in fact, burn raisins. the point of which was to have fewer raisins. the result of which was to raise the price of raisins from $100 a bushel to 400. that was thought to make the farmer better off which it did and it made the customers worse off. and someone said it's wasteful to burn raisins. let's take the raisins and give them to school children. and maybe we could even sell a few. and if we do we'll get that extra money to the farmer too. now we have school children with raisins. we have the farmer having more money. sounds like a pretty good program. of course you have taken some raisins. but what i don't see is how

either the farmer or the school children are any the worse off. and if they are no worse off what compensation are these farmers entitled to? of course free riders could become yet better off. they could charge at the higher price that the program creates. $800. but after all that isn't the issue. because you have to have as a rule, no free riders. and once you admit that is a rule, everyone including, perhaps, these plaintiffs are better off than none at all. that's a very simple argument and what i understand to be the economics of the fdr, the 1949, et cetera and yet we have had endless cases, complexities opinions and fines and i'm probably wrong with my simple argument. i doubt that i'm wrong but

nonetheless i want you to explain what's wrong with it. >> we agree with much of what you said but it is not a take of the raisins. >> you want to say it's not a taking. >> is it a regulatory program classically analyzed under penn central because there is a press propertity of advantage. this does not distinctly affect the petitioners. if petitioners are correct since 1949, every year there has been a reserve requirement every producer has had a per se taking. >> i largely agree with what the chief justice said just the way i think about this program is that this does seem a weird historical anomaly. am i right that all the rest of these agricultural programs are done definitely? such that saying that this was a taking was not effect other

agricultural programs and also, are there any other programs out there, forget agricultural programs but are there any other programs out there that we should be concerned about if we were to think about this as a take? >> well, i -- with respect to agricultural programs there are eight or ten other programs that have reserve provisions in them. i think most of those are not active in the sense that there is currently reserve. just like this one has not. if this has outlived its usefulness, the program is work exactly like it should. the committee has decided not to impose a reserve requirement. >> you said there are eight or ten other programs that they have -- >> they have, like this one, provisions permitting the use of a reserve system but they are not actively utilizing it. >> how long have they not been

actively utilized? >> i think it has been in the last decade. i don't know precisely. but one thing that has happened in this industry it has changed drastically. you can see the letter, they now believe that the reserve requirement should -- sun maid believes it should not be institute bud they firmly believe that petitioners should not be permitted to be free riders on this program. >> and what of nonagricultural programs? are there other regulatory programs where the government says produce something that is characterizable as property? >> i think the most immediately relevant one which this court sustained was in the monsanto case. that was a case in which a condition for market pesticides the manufacturer had to submit

information to epa -- >> we know about that one. anything else out there? tell me what the realm of regulatory programs is we ought to be concerned about if we were to say that the production of stuff that somebody claims a property interest in is a taking? >> i'm not aware of other programs but monsanto is wide spread in our society and what the court basically said there was that if it was known when someone before they entered commerce and applied their application if they knew that the material would be disclosed to the public or used by the government for approving other applications there was no taking. >> i guess the government could prohibit the introduction of harmful pesticides into commerce. i am not sure it can prohibit

raisins. dangerous raisins. i can understand imposing that condition on monsanto. and that would not be unconstitutional. but it seems it is in raisins. >> the court's rationale in monsanto was not based on the fact that the product was dangerous. it was the fact that the manufacturer knew when submitting the information to epa that it would be subject to disclosure and its property value either eliminated or appropriated by the government as it were in its use for evaluating other applications. >> looking at your brief on page 32 you say producers dissatisfied with the reserve regulations may plant different crops. that is an audacious statement. if you don't like our regulations, do something else. >> that's not the only option they have. they can sell the grapes for other purposes. >> you mean wine?

>> wine or grape juice. the grapes the overwhelming majority of them, the tomson seedless grapes have a variety of uses. and that is one thing that the grower would take into account. >> if you don't like regulations you can challenge them in court to see if they comply with the constitution. if the answer is always you can do something else we'll never have these kinds of cases. >> but this is a subsequent point not a conclusion or reviewpoint. the point is that there is market regulation. people in this industry know what the regulation is. and the hornes have operated under this marketing order for 30 years before they challenged it. >> it seems to me -- >> i'm sorry -- >> even if it's a take it's okay. everything will be okay. everything will work out. that's what i get from you?

>> the fundamental argument is it's not a taking to begin with because the grower voluntarily submits the total amount of its raisins to the handler. the handler then separates them into two quarters. one to be sold now and one to be sold later but they both have to do with the timing and regulation of sale which petitioners acknowledge that the government can regulate the timing and manner of sales. the there are two markets, the free market and the tightly regulated markets. >> if you don't like we're going the say the pledge of allegiance in public schools. if you don't like it go to a different school. i don't understand why that's not the same analysis here. this may be a taking of your raisins or not and if you don't like it grow something else. >> by the way i do not believe that nolan cut back on the

rationale of monsanto. what the footnote in nolan said we do not regard the ability to build on your property a real house as a governmental benefit it did not say it reaffirmed the idea where there was an exchange where the government was giving a benefit of clearing the product for use. >> where you say introducing raisins into interstate commerce is a government benefit, right? >> we think the regulatory program is a governmental benefit. >> not the regulatory -- you're saying that the activity which is subjected to this taking is the introduction of raisins into interstate commerce and you are saying that is something that the benign government can give or withhold. >> it the position to do it. but nonsanto is not the only case. yee said the same thing

regarding real property. that was the case in the mobile home park. it was claimed there was a taking there because the owner was subject to rent control and it was argued it was like low rhett toe because it was a forced occupation and the court said that the yees had voluntarily chosen to enter the rental market and the government could then because they voluntarily done it regulate the price that was being charged. >> mr. mcconnell was asked a number of questions about the leonard case but i take it you don't think the leonard case as very important bearing on this case because you cited one time in your brief a passing reference on the issue of fungible goods. you did not say this is another

version of leonard? >> to the extent that leonard was about tax. this was program was not identified as a tax because the raisins don't come to the government. the raisins go into a pool that belongs to all of the producers and is divided up among the producers. these are not things appropriated for the government's own use. but leonard is instructive because like the oyster shells or raisins the court says they are fungible. their only value is for commercial sale. this is not like the value of real property. these raisins are valuable only for sale and in fact as i said, this order kicks in only when the producer has committed the raisins to sale by handing them to a handler. >> put all the regulatory aspects of the program aside for

a moment and say this is a simpler program and it said the government says to the raisin industry we could tax you and say you have to deliver 2% of your net profits. we're not going to do that. we're just going to take 2% of your raisins. would that be constitutional? would that be a taking? >> that would be like leonard an in-kind tax. i don't think anything would prohibit that being done. and we think the fact that that would be okay is instructive here as the court's discussion of leonard suggests, but the court -- >> but you don't think of this case in that way. and why don't you? >> it's analogous in the sense that congress may be able to do this in a different way. the reason i said it is different is that the oysters -- the raisins are not being used for the government's program. they do not go to school lunch

programs. if the government wants raisins -- >> we don't usually allow the committees of producer to apply taxes. that is done by congress and this is done by a committee. >> but it's a committee elected by producers. >> so they can impose taxes you're saying. this is just like a tax. >> what i was saying is that the government may well be able to impose a tax. but this is a regulation from the producers. >> a majority of producers agree to i have to be bound by? i mean, these people disagree. >> they do disagree but that does not convert into the a taking. if they believe the program is not operating correctly -- >> i'm not saying that the disagreement converts it into a

taking but it doesn't carry much water to say it is a program adopted by producers. if 51% of the producer want to do it there are 49 that don't want to do it. >> it's a pretty good indication that the premise on which this statute was put in place in 1947 operated then and operates now. and it shouldn't be necessary to calibrate whether the benefits outweigh the burdens. >> central planning was thought to work well in 1937 and russia tried it for a long time. >> well, again, if this program is not working it can be modified and in fact the committee comprised of producers decided not to impose a reserve. >> you made the point that the government sells the raisins for the benefit of the producers. what if the producers think they can do a better job of selling them and get a better price

because they are better producers or marketers? they have export contacts that others don't? >> this is just standard regulation. what congress has said is if you're going to sell you have to sell in the manner set up under this program. >> that's not usually -- when you are talking about that type of regulation. the raisins have to be so big and have safety inspections and all. but you are presenting this is a good program because we sell the raisins and give some of what's left to the producers. i don't think that is a common approach. >> there are two pools of raisins and how you treat or how you implement the notion may vary but where you have that, the similarities are much more fundamental. you have -- the free tonnage

raisins. and there was a judgment made when this marketing order was established and sun maid and the raisin association believe association believed it was true during these years, if you have a big sur plus, as there was around the turn of the century, it would make the prices plummet. if there's extra raisins that are put on the open market because the demands for raisins is inelastic. so what this marketing order does is estimate where it operates estimates what the requirement will be and that's completely open to the market. the reserve raisins they are essentially valueless because you don't need them to satisfy the existing market. you take them off the market to pop up the prices of the free tonnage raisins and then the committee will sell them in a manner that will not undermine -- >> perhaps this same sort of

program was carried out with respect to real property. would you provide the same answers? propose that owners of real property in a particular area think that the value of their property would be increased if they all surrendered a certain amount of that property to the government for the purpose of producing -- creating a park or for some other reason and so they get the municipality to set up this program and one of them objects to surrendering this part of his or her land. would that not be a taking? >> i think that property would be fundamentally different. >> why would it be -- i thought you were saying that you were not arguing between personal and -- >> i think the lucas position is very instructive. when the court was talking about the ability to regulate real property, there is a difference between real property and personal property, at least personal property being used for commercial purposes which might

be rendered valueless. >> mr. kneedler, what are the limitations? >> six years, i think it would be. >> has there been any reserves created in the last six years? >> i think the last one was 2009, 2010. i wanted to correct one fact. >> explain to me why the market for raisins is inelastic? people won't buy more raisins if they are cheaper? >> that's exactly correct. it's just the quality of raisins and there's a limited set of outlets. raisins are primarily used as food ingredients in raisin bran and stuff like that and the price doesn't affect demand. and, therefore, if you put a great surplus on the domestic market the prices will crater. this has a very sensible

approach. >> mr. kneedler, you don't have to convince us that this is a sensible program for you to prevail, do you? >> no. >> because we could think that this is a ridiculous program, correct? >> but it's one that's been around since 1949 and petition's argument means that every argument since 1949 has had a per sake takings. >> it would help that your case is ridiculous. you acknowledge that? >> it is not -- it is not -- let me be clear -- a ridiculous program. >> this is a serious point. the ridiculous point of a program is not really for us to decide. >> yes, i agree with that completely. this is a regulatory program and should be thought under the court's regulatory -- >> mr. kneedler, you were asked this before but your answer wasn't clear. marketing raisins of this sort

that have a reserve pool you said there were eight or ten of them, have any others been operative as this one has been and how many -- >> operative in the past, most of them are not operative. operative in the sense that the reserve -- this is my understanding, that the reserve provision has been triggered. >> the government selling the reserve? >> i think it's true of maybe several others. i'm not sure. some of them have to do with the handler -- the difference between the handler and the producer. i want to correct -- >> go ahead. >> i want to correct a factual computation. in one year $110 was the field price and because of the mathematical calculations the claim was that the petitioners would have been better off. that's not correct. the mistake is that the assumption is that all of the raisins would have been sold at the field price if they were all put on the markets and that's inconsistent with the premise of the order.

the only reason that there's a high field price for the tonnage raisins, the other ones were taken off the markets and would not have been recovered in that way. >> how many of these programs are there, of marketing orders? >> i think there's scores of them. >> i mean, i'm trying to put the eight to ten in relation to how many. >> i don't know the total number but we can follow that up with a supplemental letter. i think there are scores of them. but this is not fundamentally different from the others. and again, the government is not acquiring these raisins for its self. the government doesn't actually keep them in its position. it just tells the handler to cope them and sell them later rather than selling them now and it's not an appropriation of private property. >> mr. mcconnell you have five minutes remaining. >> thank you mr. chief justice. so, several things have been cleared up. the government now does concede that the government takes legal title to the raisins.

the government does -- >> all the time to the extent that we've eschewed taking total titles meaningful with respect to actual control or actual benefit. we trustees take title and but it's not for their benefit. it's for the benefit of their beneficiary. >> that's true justice sotomayor. but the taking of the -- the government is not a trustee here. and -- >> but in a form, yes. it's still good to sell the reserve raisins at the best price it can get given the limitations on the free market. >> it sells for the best price and uses the proceeds for its regulatory -- >> you only have four minutes.

do you have other factual points? >> as to the factual point, calculations are not based upon us selling all of the raisins at the field price. our calculations are isbased upon being able to sell all of the raisins that the secretary has said would be the price in an unregulated price, which is $747 per ton. and that is -- it is certainly not true that these reserve raisins are valueless. they are an extremely valuable commodity and in most of the years, the producers of the raisins receive absolutely nothing for them. the important point here though, is that it is not any less of a taking, even if there is a benefit. i have no doubt for example that in loretto the value of the department went up because it became cable-ready for its tenants. that did not make it any less of a taking as this is a per se

taking and any benefits only go to whether there might be some kind of implicit in kind compensation as a result of the benefit and if this were an em nint domain proceeding, this might be relevant. this is, in fact an enforcement action in which the question is whether the department of agriculture was entitled under the constitution to demand either the raisins or their monetary equivalent without any payment of compensation. >> why isn't it for them to make that argument? >> because -- >> you're better off? >> because if you would look at -- >> i mean is it -- >> no it's the regulation. i'm sorry. if you look at 7cfr-989.166 c,

you will see that's a provision for what happens when the handler does not turn over the reserved raisins over to the department of agriculture. there's very specific provisions for what happens and there's no provision for implicit in kind. >> and the fact that all the raisins producers are better off because of this program including you, but no free riders, that's what's the compensation. can they at least argue that, have they conceded that? >> under this regulation i do not think it is open to the department of agriculture to argue that. i think that that would be a logical argument if this were an eminent domain proceeding. reserving, of course the point that we believe that this program does not benefit the producers. we believe that this program actually makes the producers

worst off. the only people who benefit from this program are the recipients of the export subsidies. >> the exporters? >> that's right. >> mr. mcdonnell, can i take you back to the very first thing you said in this argument because you said typically the handler doesn't take the product and the handler doesn't pay for the product and you would think that the hornses would only have a takings claim for the raisins that they produced and not for the raisins that other people produced. but you said that that's not correct in this case? >> it is not, because they pay -- a check went out from the raisin marketing association to the producers for every raisin, not just the free tonnage raisins but for the reserve tonnage raisins as well. so the hornes are the only people with the financial interest in the raisins in this case and that is unusual. >> mr. mcconnell, this is

probably here nor there but what has the drought been on the raisin producers? do you know? >> it is not good. >> a carefully guarded response. >> and i wonder if i'll be able to take a shower when i go home. >> thank you, counsel. the case is submitted. coming up tonight on c-span 3, a senate hearing on seafood industry regulations. then a forum on issues facing the black community in america. after that, a discussion on the role of government in combatting poverty in the inner city. and later, the national review host an idea summit examining conservatism. next, a hearing on seafood industry and regulations. louisiana senator david vitter has introduced legislation that would increase inspection

standards on imported seafood to ensure foreign inspectors meet safety standards. this hearing is an hour and 20 minutes. good afternoon. we're going to start our hearing today on the impact of federal labor and safety laws on the u.s. seafood industry. thanks for joining us today. we're going to be hearing from two panels of expert witnesses and stakeholders a federal panel who i'll introduce in a minute and then a stakeholder panel. i want to thank all of our witnesses for being here today to testify on these important issues. as anyone who has visited louisiana knows, we enjoy great quality seafood and that plays a major role in our culture and in our economy.

and this is true for other states in the united states. it is an important part of our economy. in louisiana that seafood industry supports 20,000 jobs in the state with an annual economic impact of over $1.7 billion. more regionally, the gulf states produce 70% of the nation's oysters, 69% of domestic shrimp, and are a leading producer of domestic hard and soft shell blue crabs. more broadly, the seafood industry is responsible for creating jobs and revenue that support so many families along the gulf, in alaska and elsewhere, including the east coast and the west coast. seafood processors in louisiana and across the gulf coast rely on seasonable foreign workers to fill the most labor intensive positions throughout the sector. these workers come to the united states legally under the h2b visa program. many of these operations take place in small rural communities where access to a stable,

reliable labor force can be extremely difficult. recently we've seen the difficulty of compliance with this program increase, most notably the department of labor's decision to stop accepting private wage rate surveys which has often forced businesses to reallocate their financial resources. and that has been a big, big cost increase for these businesses. another area that requires attention is ensuring the safety sf seafood that's being imported into the country. it is imperative that we ensure that foreign imports are playing by the same rules and regulations that our domestic producers operate under. that's one of the reasons i introduced the imported seafood safety standards act. this legislation increases inspection rates, quality standards, and penalties in order to protect american

families. in closing, we need to make sure that federal regulations of all types, like the two areas i've highlighted, do not unfairly and negatively impact our small domestic seafood providers. what washington bureaucrats often fail to realize is that their rule making can literally put some small businesses like domestic seafood producers out of business so we need to focus on these and other regulatory areas. again, i thank everyone for being here today and i look forward to our discussion. with that i'll turn it over to our ranking member. >> thank you, mr. chairman. and thank you to all of our panelists this afternoon for being here. as the chairman said, seafood is a big issue in my home state of

new hampshire. just as it is in louisiana. even though we only have 18 miles of coastline, it is an industry that is important to the state, both because of our tourism industry and the fishing -- the pleasure boat fishing that goes on off the coast of new hampshire, but also because we have not only a small fishing industry, but we also have a fish processing industry in new hampshire. and mr. chairman, in the interest of brevity and because i have to leave early, i'm going to submit my full statement for the record but i just wanted to raise a couple of concerns. one is not directly related to this hearing, but since we're talking about seafood, i feel compelled to talk about the concerns that we have in new hampshire and the northeast relative to the fishing quotas

that have been set by the department of commerce, and specifically by noaa. over the past few years, the federal government has found that the declining levels of cod in the gulf of maine have been dramatic. there is some disagreement about that among scientists and among the fishing industry, but they have set very dramatic, very low quotas that have almost totally decimated the fishing industry in new hampshire and, again, i appreciate that that's not the subject of today's hearing, but it is an issue that we are very concerned about and that i think it is something that we need to deal with because of its impact on our small business fishing fleet in new hampshire. the other issue that is relevant to the day's discussion is one that is having an impact in new hampshire as well. and that is the impact of creating a separate federal program to remove catfish inspection authority from the fda. as some of you probably already know, the 2008 farm bill

transferred the inspection of catfish alone from fda to the department of agriculture, and it left the fda with the jurisdiction of all over seafood products. that means that all of our seafood processors that handle catfish will now be subject to two separate sets of regulations. this is a costly and unnecessary burden on these businesses. it will kill jobs and hurt economic development. and in fact, just the prospect of this regulation has put a freeze on job creation in some of those companies in new hampshire. one seafood company, highliner foods, which i have had the opportunity to tour, has put on hold the job expansion that they would like to do because of the uncertainty around these regulations. mr. chairman, i'd like to enter

this letter from highliner foods, for the record. >> without objection. >> this duplicative regulation does not just affect the seafood industry. it is not really about food safety, i believe. it is an effort to set up trade barriers against foreign catfish that will dramatically affect not only the seafood processing business in new hampshire and this country, but it also could put us open to challenge at the wto and trade retaliation against other agricultural industries. so, mr. chairman, i have been working with other members of the senate to try to repeal this duplicative program. i hope we can do that. i think it is unnecessary and i hope that we will have the opportunity to do that and to further discuss this, not just in this committee but when we get to the floor of the senate. so thank you, again, to our panelists for being here and i look forward to the discussion today.

>> thank you, senator shaheen. >> we'll now go to our federal panel of witnesses. i'll introduce both, then we'll hear their testimony and have discussion following their testimony. dr. steven solomon is deputy associate commissioner for regulatory affairs at the fda. he was appointed to that in april 2014. prior to his appointment, he served in several capacities at the fda since 1990. dr. solomon holds a dvm degree from ohio state university and a masters of public health from johns hopkins university. and prior to joining the fda, he owned and operated a private veterinary practice. and he will be followed by miss portia wu assistant secretary of the employment and training administration within the u.s. department of labor. she was appointed to that in

april 2004 and she now leads that employment and training administration with its mission to address our nation's workforce needs through high-quality training and employment programs. prior to that, she held a number of positions in public, non-profit and private sector situations, including serving at the white house on the domestic policy council, a special assistant to the president for labor and workforce policy. miss wu holds a yale law school degree, and a degree from yale college, and a masters degree from cornell. is originally from albany, new york. welcome to both of you and we'll start with dr. solomon. >> good afternoon. chairman vitter, ranking member shaheen, i am dr. steve solomon, deputy director for associate affairs at the fda. i appreciate the opportunity to appear before you today to discuss the agency's ongoing efforts to oversee the safety of the u.s. seafood supply. fda has a strong regulatory program in place to ensure the

safety of both domestic and imported seafood. in fact, the hazard analysis and risk preventive control framework of fda seafood safety program is a basis for the preventive controls requirements for other fda regulated foods called for in the fda food safety moderation act, or fsma. the agency has a variety of tools to ensure compliance with seafood safety compliance, including inspections of both domestic and foreign processing facilities, 100% electronic screening of you will a imported products, examination and sampling of domestic seafood, and seafood offered for import in the united states. domestic surveillance sampling of imported products. inspection of seafood importers and foreign country program assessments. in today's testimony, i want to discuss the fda's regulatory framework for overseeing the

safety of the u.s. seafood supply, emphasizing the agency's risk-based efforts with regard to imported seafood. processors of fish and fishery products are subject to fda's hazard analysis critical control point regulation. the regulation requires domestic and foreign processors of fish and fishery products to understand the food safety hazards associated with their process and product and require a preventive system to control for those hazards. every processor is required to have and implement a written haccp plan whenever a hazard analysis reveals one or more food safety hazards that are reasonably likely to occur. foreign processors who export seafood to the united states also have to -- apply to the haccp regulation. in addition, haccp regulations require importers to understand the hazards associated with the

products they are importing, and to take positive steps to verify that the obtained shipments from foreign processors who comply with these requirements. in recent years, they've been reports of seafood in the united states being labeled with incorrect market names. fda's aware that there may be economic incentives for some seafood producers and retailers to misrepresent the identity of the seafood species that they sell to buyers and consumers. while seafood fraud is often an economic issue, we have heightened concerns when species substitution poses a public health risk. the agency has invested in significant scientific advancements to enhance its ability to identify seafood species using state of the art dna sequencing. fda is actively working to transfer this technology which will enable the seafood industry and others to monitor and test their products to confirm the

species purchase is correct. turning now to imports specifically, it is the importer's responsibility to offer for entry into the united states a product that's fully compliant with all applicable u.s. laws. fda has numerous tools and authorities that enable the agency to take appropriate action regarding imported product. in recent years, the agency has significantly increased its number of foreign food inspections. furthermore, if fda requests to inspect a foreign facility, and is refused, fsma gave the agency the authority to not allow that facility's food submission into the united states. besides haccp inspection of foreign facilities, the agency also conducts surveillance of food offered for import at the border to check for compliance

with u.s. requirements. fda reviews all import entries electronically prior to the product being allowed into the country. the agency has implemented an automated screening tool, the predict system, which significantly improves fda screening of imported food. predict utilizes the admissibility history of the firm or a specific product and incorporates the inherent risk associated with the product. for example, a predict review includes the facility inspection history, date of quality concerns, sample analytical findings and type of product that the firm offers for entry into u.s. commerce. based on this electronic screening, the agency will direct resources to the most critical entries that have the greatest impact on public health. another key regulatory tool for controlling imported goods is the import alert. import alert informed fda field

personnel that the agency has sufficient evidence or other information about a particular product producer, shipper or importer, to believe that future shipments of an imported product may be violative. on the basis of that evidence, fda field personnel may detain the article that is being offered for import in the united states without physically examining the product. the agency has over 45 active seafood import alerts that focus on imports from certain firms, products, and/or countries based upon past violations. for example, the fda imposed a countrywide import alert on five applicable species in june 20007 due to the presence of unapproved animal drugs. these are subject to private

laboratory testing before they allow the investment in commerce. finally, i'd like to note that the fda is working to better accomplish its mission to promote and protect the public health of the united states. as one example they have evaluated the country's laws for implementation of good agricultural practices. fda uses the information from country assessments that target better surveillance sampling of imported agriculture products, informed the planning of foreign seafood inspections, provided additional evidence for potential regulatory actions, and approved collaboration with foreign government and industry to achieve better compliance with fda's regulatory requirements. in closing, oversight of the safety of the u.s. food supply continues to be a top priority for fda. the agency has a strong regulatory program and place for

seafood products. we'll continue to work with our domestic and international partners to ensure the safety of both domestic and imported seafood. thank you, again, for the opportunity to appear before you today, and i'd be happy to answer any questions. >> thank you very much, doctor. now we'll hear from ms. wu. welcome. >> thank you. chairman vitter, members of the committee, thank you for having me here today to discuss the program and the seafood industry. my name is porsha wu and i'm the assistant secretary at the department of labor. together, we administer the h2b program. allows employers to meet legitimate needs for temporary foreign workers. and the department takes very seriously the statutory responsibility to administer this program. and to ensure that u.s. workers have meaningful access to these job opportunities that their wages and working conditions are not adversely affected.

these efforts help protect foreign born workers from exploitation. the department recognizes the vital role that the h2b program plays for the seafood industries. many seafood employers are multigenerational, family-owned businesses, and they're a source of cultural pride in coastal areas. the jobs these businesses provide are critical to local communities and create additional jobs in other related industries. and, mr. chairman, as you referenced, these businesses are often a remote or rural areas and they can struggle to attract and retain a sufficient workforce necessary to provide seafood products for the united states and for the world. thus, many do depend on temporary workers, including temporary foreign workers. over the last five years, employers in some of the largest seafood producing states, like louisiana and maryland were

among the top ten users of the h2b program. last year, approximately 55% of the seafood jobs certified by the department of labor were located in the gulf coast states, ranging from shrimp boat deck hands in texas to seafood and crawfish processors and packagers in louisiana. we understand that seafood employers and others are impacted by the current annual 66,000 number cap on h2 b workers. that cap is set by congress. and we are, again, seeing demand nationwide that exceeds that cap. the department is committed to maintaining a fair and reliable application process for those who use the program. last week, in order to quickly reinstate the h2b program and to bring continuity to that program, the department of labor

and homeland security jointly issued two new regulations. one is an interim final rule establishing the overall framework for the h2b program. i should note it's open for public comment until june 29th. the other is a final updated wage rule that allows the use of private wage surveys in certain circumstances in keeping with the recent court decision. these rules immediately restore processes for approving prevailing wage requests and labor certification applications so the program can continue to operate. they expand employer requirements for recruitment and consideration of u.s. workers. so united states workers have a fair shot at finding and applying for these jobs. it also permits employers in the seafood industry to continue to stagger the entry of their h2b workers into the united states. the regulations strengthen worker protections by clarifying employer obligations with respect to wages, working conditions and benefits that must be offered to h2b and u.s. workers alike. and finally, as i noted, the rules explicitly include the use of private wage surveys, which were restricted by a recent court decision. and so we set guidelines for how these employers, these surveys can now be used.

and that includes state surveys often used in the seafood industry. both the department of labor and dhs are trying to ensure a smooth transition between the former regulations and the new rules. first and foremost, anyone who had already applied under the old rules or who were in line does not have to change anything. they will continue to operate under the prior regulations. second, the new regulations allow an expedited process for employers who have a start date of need before october 1st, 2015. so people will have time to quickly transition. in conclusion, the department of labor strives to maintain an h2b program that's both responsive to legitimate employer needs where qualified u.s. workers are not available. and to provide adequate

protections for u.s. and foreign temporary workers. doing so is not only good for law-abiding employers, including employers in the seafood industry, but also for the many u.s. workers seeking jobs in fields that rely heavily on the program. thank you, again, for this opportunity and i look forward to answering your questions. >> okay. thank you. and we'll start with our questions. and let me begin with you on one of the topics you discussed directly. and that's private wage surveys. isn't it correct that the new rule you're describing greatly limits compared to past practice, greatly narrows and limits the use of private wage surveys? >> senator, it is true that in december last year, we had our previous rule allowed significant use of private wage surveys. that use was injoined by a court

in december of last year. and the court's opinion lays out a great deal of reasoning including concerns about how private wage surveys might undercut wages and some other reasons that, for example, surveys that use only entry-level wages are not permissible under the law. they found that to be a violation of the law. at that time, we had to immediately suspend the use of surveys because of the court's order. however, with our new rule, we allow surveys in limited circumstances. there are some, and again, it's in keeping with the court's order, we believe, where, for example, an occupation isn't well represented. we also allow for state conducted surveys. many states do this. there are basic criteria in keeping with the court's order. for example, as i mentioned, you have to look at average wages in an industry not simply entry-level wages. but we believe this may be an opportunity for many in the

seafood industry to take advantage of this provision. we actually, i was talking with some of your folks from louisiana today, and we were putting out some assistance next week to explain to people how they can use these surveys. in the transition provisions, we also said that, for example, if you already got your certification but haven't brought your workers in and wondering can i go back and get a new survey wage as long as it complies with our basic criteria, we put in a provision to allow people to go back and adjust that wage. >> well, as you know, there's a lot of concern that the new system is too narrow and narrows the use of these surveys way beyond anything that would be absolutely required or demanded by the court. what's your reaction to that critique, which i think is a fair one? >> thank you, senator. i think we believe that the new provisions are in keeping with the court's order. i should note that the state provided surveys, frankly may be getting criticism from the other side going beyond what the court allowed.

i do think it may be an avenue that industries, particularly the seafood industry could take advantage of and have taken advantage of it in the past. >> does use of these surveys allow for recognizing differences which exist from one local area to others within the state? >> yes, senator, it could. it's up to the state as to what level of detail is conducted in the surveys. they certainly could provide a survey where there are differences in locality. obviously with different sorts of tasks in the industry. and the department is not in the business of dictating how employers should pay their wage, or not. i know some employers, for example, use peace rate. they'll be able to continue doing so. >> okay. and dr. solomon, my understanding that in 2014, only about 2.77% of all seafood imports were inspected.

do you think that percentage is adequate? and if not, what does the fda plan to do differently? >> so the seafood safety system i described during my testimony is multifacetted. so there's many components of it. first, it's putting the hazard analysis critical control point regulations in place which puts the burden on the processor to produce safe product. then we have oversight by doing foreign inspections of them. then we also conduct inspections of regulations by the importers. so the testing that takes place at the border is a verification activity or a surveillance activity to try and find, if there's any flaws in this system and how it's working and to identify them and verification activities. we test at different rates a sampling. so taking generic rates for seafood, we test higher rates

for certain products, certain commodities, higher risk areas, and much higher rates than that because we want to have additional verification for those particular aspects, which pose the greatest safety concerns. >> i understand all of that. i didn't mean to suggest by my question that you just do one thing. you just stop 2.77% at the border tested. so as part of that overall effort, do you think the net inspection rate of 2.77% is adequate? >> examination at the border at the verification activity at the rates we do, we think is a viable control measure in light of all of the other measures that we have in place. >> so you have no plans to increase it? >> with the resources we currently have, we would not just increase sampling testing. if the agency had additional

resources, we would focus on all the aspects of the framework -- >> why would you increase it if you have more resources? >> greater oversight in how the system's working, we would do more foreign inspections, importer examinations. but, again, not on a universal basis, on a risk basis. >> the level you do now is not optimal. >> we think we actually have very few food-borne illnesses associated with seafood products. but with more resources, the agency could do more. >> okay. i -- i'm just trying to understand you're suggesting it's adequate, but in the next sentence, you say you'd certainly do more with more money. >> so it's a risk basis in terms of looking at the products that are coming in. with additional resources, we could look at lower levels of risk. we're looking at the highest levels of risk now. >> a batch of actually tested

and rejected seafood imports has been simply shopped to another port of entry. what in your overall system today categorically prevents that? >> so we have a notification system. when we refuse an entry that electronic notification system not only notifies customs and border protection, but all the other fda district offices imports. >> and so how is that batch tagged indelibly so that that notification is meaningful so that those other ports can identify the same batch we're talking about. >> so as you may be aware, we've been looking -- working for many years to try to get a marking rule that would provide that marking of the product. that is not in place yet.

but right now, we do notifications based off the data that we have on who the importer, is what the commodity line is, and make sure everyone is aware about that shipment was refused. >> so if they -- there isn't a set marking rule. so if they change the packaging or any of the markings, they could very possibly get away with what i'm describing? >> the system is not foolproof. i agree with you. but we do do notifications. >> okay. well, i would suggest that's a bigger hole than simply saying it's not absolutely foolproof. but we'll pursue that. senator shaheen? >> thank you, mr. chairman. dr. solomon, as i said in my opening statement, i'm very concerned that we are in the process of setting up a new program under the department of agriculture to separate cat fish out from all other seafood and inspect them separately. i think it's duplicative, and i

wondered if you could talk about the program that has been operating under fda, which up until now had the responsibility for inspecting cat fish. can you tell us how it's functioned? and whether or not cat fish consumption has posed a risk to public health? is there a reason to set up a separate program? >> so the last part of the question, cat fish is not one of the species that we particularly target. controls in place that have been adequately controlling issues associated with cat fish. >> so, and just to be clear, it's not the fda or the department of labor or -- usda that has set up this program separately. it was congress that did this.

and the farm bill. but there wasn't a safety risk to human health from catfish that triggered this effort. is that how you would analyze the situation? >> i'm not aware of any specific safety hazards unique to cat fish. >> thank you. and i know it may be hard for you to put a cost figure on the inspection of cat fish under the fda jurisdiction that it may take you some time to come up with that. it's my understanding that right now the usda's catfish inspection program, it's

estimated that it will cost about $14 million a year to operate. so i'm going to ask you to take for the record and try to get for this committee the cost of the inspection of cat fish under fda jurisdiction if you would. >> we'd be happy to provide that back to you. >> okay. thank you. miss wu? >> i appreciate the fact that the department is in a challenging position relative to how to make the visa program work given that we have not yet taken up comprehensive immigration reform, which would go a long way towards addressing this challenge. but in the meantime, we do have small businesses in my state, we heard from the chairman in louisiana who are using the h2b program, and are confused about how the new rules will affect their business. so can you talk a little bit

about how you're addressing outreach to the small businesses affected? >> absolutely, senator. as i noted, we have a bunch of fact sheets on our website. we're also doing some sort of webinars and outreach next week to talk with people. we always -- we have frequent listening sessions. we recognize the use of this program by small business. we're happy to answer any questions. we have very detailed questions about, you know, if i already submit in my application what happens to me now. and i think as i've noted, for people who have already admitted their application for this whole court case in april, they can just keep going along. they got approved, they can keep going along, running the program the way they were going to do it this summer. there will be changes in the future. for those who want workers before october 1st, we put in sort of expedited protsz. as you may know, dhs administers

the cap, but the cap was hit fairly early this year. but we continue to process requests for labor certification because there are some exceptions. we're happy to answer any questions. we are doing outreach to small businesses. >> and so when you advise those webinars that you're doing, do you notify small business administration so they can get out, get it out to the small business development centers to share that with other businesses around the country? how do you get the word out that you're doing those kinds of webinars? >> well, first and foremost, we use the contacts list we have of the users of the program. we focus on the contacts we have. but if you have other suggestions or if you're concerned about the employers in your state. we'd be happy to conduct. who follow these regulations closely. we make sure to get the word out to them.

and we have regular listening sessions with them to hear about their concerns. i will note that the new comprehensive rule is an interim rule. we took comments on a similar rule in 2011, 2012, made some changes in part, in recognition of the concerns of small business. we are taking comments, again, and we very much welcome people's comments on how we can improve the program and make it usable for them. >> if anybody has applied for h2b visas in the past, will they get a notification of proposed rule changes? of various outreach efforts that you're doing automatically because they're on your list? >> they should. they should. i will check with my operations. >> behind you, they're nodding. so hopefully that means that any new hampshire company that's applied in the past will get those notifications. >> yes, that's our hope. >> thank you very much. >> thank you. next is senator ayotte.

>> thank you, chairman. i wanted to follow up on the question that senator shaheen had asked dr. solomon about the cat fish program. as far as i can tell, the u.s. fda handles seafood inspections for all other forms of seafood, correct? >> that is correct. >> and so there's no reason why you couldn't continue to handle independently the inspection as you did before congress on its own, created this duplicative inspection regime, which is actually a low-risk species, correct? >> we are currently, since that rule's not in effect yet, we are currently handling all of the catfish inspections. >> and in the end, as i understand it, it's been interesting to me, we have nine gao reports on this topic. and those nine reports consistently recommend

eliminating the newly created by congress usda program that as i understand, you wouldn't know the numbers, but as i understand has already spent $20 million, not one fish has been inspected. obviously the fda has handled the inspection of seafood for a long time. and here we are in the congress going to already spend another usda trying to stand up, duplicative inspection. already spent $20 million on it. it's going to cost usda, the estimate is $14 million a year. to continue doing what you already do quite well. so i don't know if you've had a chance to look at these gao reports, have you? >> i've not nine of them, but i have read some. >> and do you agree that you can handle the inspection of cat fish? we don't really need another office to inspect catfish? >> the programs worked effectively as far from fda's perspective. >> right. so this is a great example of government run amuck truthfully. the notion that we already have

the fda doing its job, inspecting seafood, and to carve out just cat fish so that we can spend millions of dollars more to have the usda have another office inspecting catfish, which you're already doing quite well for one species of fish. you know, these are the kinds of things i think people look at washington and they say, what are y'all doing down there? so i really hope, you know, that we will have some common sense on this and allow you to continue to do what you've been doing historically rather than creating another continuing to plunk millions of dollars into a duplicative program. i also want to follow up on the h2b issue. i share, obviously, i serve in new hampshire with senator

shaheen. and what i have heard in new hampshire, many of our seasonal businesses depend on these workers. as we look to the application process next year, you know, given that this is, people have to plan on what their workforce needs are. >> thank you, senator. it has been frustrating. i know. it's been frustrating for us trying to run a program. i'm sure it's been frustrating and frightening for a lot of small businesses when these court decisions come along and halt us from doing something we have been doing. and the program, they could suspend this. it has really been very

difficult. that is why we asked for a stave of the court sword so we could keep running the program this spring. and now we've issued comprehensive rules even though the department of labor believes we have the authority to do this on our own. because of the legal challenges, we jointly issue these regulations with dhs. so i think we feel like we're at least insulating ourselves from that level of legal attack. unfortunately, we do continue to see attacks from all sides on this program. but we hope that brings some certainty and stability. and we also are trying to include some provisions that will make things easier over the long run for businesses using this program. >> well, i really appreciate that. because just the feedback i've gotten from businesses in new hampshire on the program is that under the administration, it's become more complicated, more difficult, more paperwork. and as i look at the new h2b interim rules on april 29th, more than 100 pages.

and i see the burden on employers increasing. so i hope when you look at this that we need to decrease the burden on employers, not create more paperwork. especially when many of them, as you know, this is something that they do every year, and they've been in the program already. so thank you for being here today. >> thank you. next, we'll go to senator cantwell. >> thank you, mr. chair. and dr. solomon, i wanted to ask you about russian pollock. last fall i sent a letter to the fda commission requesting to fix this labeling problem. the product from pollock and not just alaska pollock. the change would prevent russian pollock from being labored as united states alaskan pollock. we requested the change in 2011, now it's may 2015. do you agree the term would give consumers the impression that the product is from alaska? >> so the determination about the species naming is handled by our center for food safety and applied nutrition. they have what's called a seafood list. i know your submission, that issue is before that group. they look at both the species

name. they work with -- they look at the dna sequencing that talks about these different species. and i know they have that issue under review. >> and so when will we hear about that decision? >> i know they're actively working on it. i don't have that. we'll be happy to try and get back with you. >> okay. do you think in your view as the russian pollock industry, a sustainable fishing, you know, industry specifically, scientifically, i guess i would say. >> so i don't think i'm qualified to speak on that. we look at fish from a food safety perspective. and we're not, you know, related to the trade issues or other issues associated with it. >> well, i think, you know, we

see things, obviously, about it. they're known for labor issues, just last month, the russian pollock catcher process sank in the bering sea. only 63 crew members survived, 69 were lost. 40% of the crew were there illegally from countries like ukraine, latvia, and so these lives are being lost because of lack of training and survival skills. and then, consumers are seeing a product that's labeled alaska. and not really alaskan pollock. we hope you'll get a decision about this and look at the way the industry is operating in the right consumers have to understand this product. thank you. thank you, mr. chairman. >> okay. thank you, both, very much. we'll excuse you and call up our second panel of witnesses as they get situated, i'm going to go ahead and be introducing all

three of them. we're really pleased to be joined by dr. mike strain, the commissioner of the louisiana department of agriculture and forestry who was elected to that position in 2007. sworn to office in january 2008. dr. strain holds a doctorate in medicine from lsu and opened the claiborne hill veterinary hospital in covington soon after he received that degree. we're also joined by mr. john p. connolly, president of the national fisheries institute, america's leading trade oh association advocating for the full seafood supply chain. john was chairman of the international coalition of fisheries associations and board trustee of the marine stewardship council and currently a board member of the international seafood sustainability organization. and we're also joined by mr. frank randall, president of

randall incorporated. frank is a seafood processor from lafayette, louisiana. over 40 years of experience in the industry. and also owns randall's restaurant in lafayette, louisiana. welcome to all of you, and we'll start with dr. strain. >> thank you. good afternoon, chairman. thank you very much for allowing us to discuss this. >> again, mr. chairman, thank you very much for the opportunity to come here and speak today. my name is dr. mike strain. i'm the louisiana commissioner of the department of agriculture of forestry and aqua culture. i'm testifying on behalf of the louisiana department of agriculture. state department's are responsible for a wide variety of programs, including food safety, combatting the introduction and spread of plant and animal diseases and fostering the economic vitality of our rural communities.

our department oversees all agriculture activities within the state, including the markets for products produced for our farmers and, especially, when we here to talk about today in the seafood industry which falls under my purview. first of all, i would like to thank miss wu and other members of the department of labor who allowed us to come to visit with them on march 23rd about this issue and have a very open and frank discussion. also with me today is the director of the national association of state departments of agriculture, which i'm a vice president. my statement is also consistent with the position of the national -- the national association of the state departments of agriculture, representing the commissioner, secretaries and directors across all 50 states and four territories. the communication of sound, public policy and programs. while promoting and protecting the environment and our consumers. in order to feed our increased

u.s. population, we must have a stable agricultural labor supply. the ability of seasonal businesses to keep the doors open and retain their full-time u.s. employees relies upon having successful peak seasons. having successful peak seasons. during the busy seasons, companies must supplement the permanent staff with temporary seasonal employees. employers spend thousands of dollars and hundreds of hours in their efforts to fill these positions. even in today's tough economic climates, there are not enough local workers available to fill all the temporary seasonal positions. and efforts to obtain u.s. workers to relocate for temporary seasonal employment have not been successful. as a result, businesses must utilize the h2b guest worker program to find seasonal workers and workers for their peak workforce needs. the program is vitally important for many industries, including

forestry, nursery, landscaping outdoor amusement, restaurant and hospitality, tourism, livestock, horse training, and many others. it's in a critical situation because seafood processors traditionally cannot fill the temporary or seasonal vacancies with u.s. workers. many businesses are located in rural areas that do not have sufficient populations to supply their extra workforce needs. many that are willing to work want full time year-round jobs. they depend on processors operating for their own jobs and business operations. in 2014, louisiana hired 5,546 h2b workers. for each worker, it is estimated

that 4.64 american jobs are created and sustained. hurricanes katrina and rita, floods on the mississippi river, spilling water through the spillways and the basin and drought. the h2b regulations released on april 29th, 2015, by the u.s. department of labor and the u.s. department of homeland security could impact an already fragile industry's economic competitiveness. they had to weather several years of regulatory instability. the h2b wage rule at the department of labor adopted in january 19, 2011 and imposed new untested methodology that would significantly increase cost for small and seasonal small businesses. after being blocked by congress in april 2013, the dol issued an interim rule that issued the same methodology for setting wages but recognized the

importance of staged wage surveys. the new rule released two weeks ago is virtually identical to the rule blocked by congress causing additional obstacles from employers in the program. in december 2014, the department of labor announced it would no longer allow the private wage rate surveys, including louisiana. my staff has spent countless hours gathering information to depict the wages that the industry is paying in our geographic location. this action forced employers into accepting higher prevailing wages, and many seafood processor haves not received the workers they need. seafood processing has begun early in the spring and with with the crawfish industry, especially, it is time sensitive. these actions have a negative impact on the seafood industry

and related commerce sectors such as restaurants, et cetera. two months ago, the lsu ago center -- ag center conducted analysis of the recent h2b policy changes from the u.s. department of labor from the louisiana seafood industry. the assessment was conducted in response to potential changes in the cost and availability of labor stemming from a mid-year cap on h2 b permits and the announcement that it would no longer accept the private wage rate surveys. results indicate that for every $1 of employee compensation created by the seafood preparation and packaging industry in louisiana, employee compensation increased by $2.06 across all sectors of louisiana economy. this includes the original $1 of employee compensation created by the seafood preparation and packaging industry, plus $1.06 of induced multiplier effects across all sectors of the economy. total income generated by h2b visa workers in the louisiana seafood industry is estimated

between $36 million and $43 million. based on the assumption of $35 million in revenue, the loss of this revenue for any given number of firms would lead to a reduction in labor income across the entire louisiana economy. eventually leading to a number of companies closing. the economic impact of two processing facilities closing is $5.3 million. and with five firms shutting down, 13.3. louisiana has already faced a number of processing facilities closing due to hurricanes and oil spills. and the industry simply cannot sustain -- be sustained without a stable workers. i'm certain not only seafood industry in louisiana impacted, but the entire industry will be affected by these actions. our markets are subject to particularly fierce competition from abroad. for example, the chinese have been extremely aggressive in trying to corner the u.s. crawfish market. this predatory practice and behavior began in 1993 and has continued. the chinese presently control over 15% of the market and capture even a larger market

share if our producers are put a further competitive price and labor disadvantage. without temporary h2b guest seasonal workers, the processors would shut down, eliminating the primary market for our fishermen and our farmers to sell their catch. as a result, foreign seafood would gain a stronger foot hold in the u.s. market and our fishermen and farmers who produce and harvest crawfish, oysters and catfish would be devastated and a key segment of the louisiana economy crippled. once we lose the processors, we would not be able to depend on them coming back in future years. therefore the losses because of the processors scale back and do not have the ability to operate during the season will have irreparable and bad repercussions now in the future. the short-term consequence of an immediate expulsion of this vital segment of the workforce would cause a production crisis and a wide variety of seafood processing, field and nursery crops, sugar processing,

forestry, livestock, restaurant industry and others. this would leave the united states and the state of louisiana no alternative but to import many food products for food countries, from countries with surplus foreign labor. this is unacceptable. we must do everything in our power to grow and support america's jobs and economy. we're asking for your help. we must streamline and expedite the h2b process. we need a working system without overburdensome rules, unrealistic timetables and outright road blocks. neglecting the labor needs of agriculture will raise the cost and the production in a way that harms farmers, fishers and industries throughout america. i appreciate your time and encourage you to work with us to find workable solutions. ways that we can facilitate rather than making it so difficult to where our processors and our industries

cannot operate. where we're at currently, we have a large crawfish harvest. and we don't have enough peelers to process it. and that puts us in a severe economic state, and i'm sure mr. randall will address that, as well. thank you. >> thank you very much, dr. strain. we'll now go to john connolly. welcome. >> thank you, chairman vitter, for inviting the national fisheries institute to present our views today. our comments will involve a brief introduction. the economics of the american seafood industry and the seafood safety system and the results. the nation's most comprehensive trade association, our members include harvesters like those on deadliest catch, importers who enable us to enjoy seafood around the globe. to processors that put fish in a form consumers recognize, to retailers and restaurants. we do represent all geographic

regions, and we are particularly proud to have had the late louisiana seafood leader of motivated seafood as our chairman. on h2b visas, essential to seafood processors. senator mikulski captured many of the senators concerns in a letter last week. quote, the lack of available temporary foreign workers has caused chaos among businesses in maryland that depend on the h2b program. more than 40% of maryland's seafood processors have been unable to get the workers they need for the 2015 crab season. i think dr. strain pretty much said it all. and i think that's reflective of the rest of the seafood community in the u.s. on economics, seafood is the most globally traded food commodities. that benefits our fishing communities as we send high-quality and bountiful american seafood to northern asia and throughout europe. also benefits the more than 525,000 americans that process, distribute and sell imported seafood.

those jobs found in nearly every state, an important reminder that trade benefits the u.s. not just when we export. seafood trade also benefit farm states in two ways. 18% of all soy goes into fish farms, many of those fish farms in asia. and to the countries with which american farmers increasingly seek to send our ag products, are countries that export seafood to america. we cannot expect to open asian markets to u.s. pork beef poultry if we shut off access to our seafood markets. seafood safety. a strong supporter in word and deed. worked closely with academia to best implement. nfi works with the alliance for a stronger fda to urge congress