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Crop-Share Farming, Implements of Husbandry & the Applicability of the MCSR

Background information and additional explanation provided by Illinois Farm Bureau® -- May, 2011

Earlier this year, unannounced and un-vetted guidance issued by the Federal Motor Carrier Safety Administration (FMCSA) designated crop-share tenant farmers as "for-hire carriers" and implements of husbandry as "commercial motor vehicles." That action resulted in farmers, undergoing New Entrant Safety Audits, being found out of compliance with Motor Carrier Safety Regulations (MCSR.) That historic and abrupt change in guidance has the potential to dramatically disrupt Illinois and Midwestern agriculture--even beyond its transportation practices. Long-standing relationships between landlords and tenants are being shaken. The resulting shift from crop-share agreements in favor of cash rent would restructure the fundamentals of farming arrangements. Illinois Farm Bureau has asked that FMCSA's guidance be corrected. There is no suggestion of rewriting any of the existing regulations; we've gotten along with them as they had been interpreted for more than a quarter century. It is the recent reinterpretations that are the focus of this effort.

There are three key interpretations of federal Motor Carrier Safety Regulations (MCSR) that are being cited by Illinois Farm Bureau® as being in error. Each of them results in the application of burdensome regulations on farmers that we argue were not intended for them. All of the interpretations come from the Federal Motor Carrier Safety Administration (FMCSA) and impact truckers and trucking. Those three interpretations are: 1. All grain hauled to market by a farmer is considered to be part of interstate commerce1 unless the receiver of that grain at the point of delivery will process2 100% of that product before it is shipped to points outside the state. If the grain is not processed in Illinois, the farmer would be considered an interstate carrier, subject to federal regulations. 2. A tenant farmer who has entered into a crop-share agreement with a landlord is considered to be a for-hire carrier when hauling the landlord's share of the grain to storage or market.3 3. Implements of husbandry of more than 10,000 pounds GVW (individually, or in combination) are considered to be commercial motor vehicles, thus subject to Motor Carrier Safety Regulations.

Typically thought of as transportation crossing state boundaries, interstate commerce can be applied to the movement of the cargo, regardless of the movement of any vehicle involved in a segment of the cargo's overall movement. 2 The commodity will be changed to another form, e.g.: corn processed into ethanol and DDGS; soybeans processed into bean meal and soy oil; grains ground and mixed as prepared feeds; or livestock processed through a packing plant, etc. 3 Regulators assume that there is some form of compensation received by the tenant from the landlord for that transportation. It need not be a direct or cash settlement.

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INTERSTATE V. INTRASTATE

The concept of interstate commerce and its variable interpretation by State regulators has precipitated the problems outlined above. These problems had not been made manifest before the advent of the Unified Carrier Registration (UCR.) It is evident that the UCR's revenuegeneration capacity prompted regulators to stretch the interpretation of "interstate commerce" to cover the broadest range of operations feasible. The purported basis (rules) for that practice had existed for years; but here again, prior regulators had not judged it reasonable to apply it to the range of operations to which it is applied today. The FMCSA is relying on federal case law as a basis for the agency's interpretation of "interstate commerce" as it applies to the shipment of grain. In the federal court cases cited, at least 98% of the grain delivered to the subject elevators was destined to be shipped outor-state. In other words, farmers hauling to those elevators could--with some certainty-- expect that the grain they were hauling would end up outside of the state. Problem is, those court cases are now being applied to scenarios where only a small fraction of grain received by an elevator might be shipped out of state. As now interpreted by some state regulators (including those in Illinois), the potential for any grain--no matter how small the portion--to be shipped from a grain elevator is being construed to mean that all grain delivered to that point is a part of interstate commerce. We take issue with this distortion of the facts. We do not believe it was the court's intent that their decisions apply the "interstate" status equally to grain received at all facilities regardless of the percent of grain being physically shipped to out-of-state destinations from that facility. Such an interpretation flies in the face of the court's reliance on the "fixed and persistent intent" of the shipper in determining whether the shipment is interstate or intrastate.

We ask that the FMCSA formally review court and agency decisions regarding the interstate shipment of grain. The question should be asked whether the label of "interstate commerce" would equally apply to farmer deliveries of grain to facilities where far less of all grain received is destined for delivered out-of-state. Differences in applicability of the "interstate commerce" designation for shipments to these facilities should be identified and explained.

CROP-SHARE & FOR-HIRE

For centuries, crop-share agreements have been common between tenant farmers and their landlords; but earlier this year the Federal Motor Carrier Safety Administration (FMCSA) issued guidance that, for the first time since for-hire trucking has been regulated, declares the tenant's cartage of that crop to be a "for-hire" movement. This guidance also contradicts decades of contrary enforcement practices under the MCSR. The disruptions in Illinois caused by this guidance and reported by operating farmers include: · Attempts to hire commercial truckers (not feasible on a large scale during harvest due to the concentration of demand and an inadequate commercial fleet); · A rush to switch to cash rent arrangements and away from long-held crop-share agreements (even as the production season is underway); and · Capitulation to burdensome regulator demands that the farmer forego those provisions in the MCSR originally intended for him/her, but under this guidance would be available only to their cash-renting counterparts. Most Illinois farmers are impacted by the change. A reported 37% of the farmland acres in Illinois in 2009 were farmed under a cropshare agreement (University of Illinois.) Tenant farmers often have multiple rented farms, many of which are on a cash-rent basis, but

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often one or a handful of their farms are operated on a crop-share basis. That mix stretches the 37% of leases to cover the majority of Illinois farmers. We have asked that the FMCSA issue a written policy addressing the nature of a tenant farmer moving his/her crop to market under the terms of a crop-share farmland lease agreement. We argue that no shipment of such crop should be considered to be a for-hire move for purposes of motor carrier safety regulations unless that cropshare agreement specifically and overtly singles out the transportation of that crop and identifies a compensation for that movement that is separate and apart from the underlying cropshare agreement. Similarly, we argued that the FMCSA should issue written policy clarifying the nature of a tenant farmer moving farm inputs and supplies for crop production under the terms of a cropshare agreement. No such shipment should be considered to be a for-hire move for purposes of motor carrier safety regulations.

the practical effect of the FMCSA guidance) would be excessively burdensome to those farmers, denying them independent operation. Not being able to economically justify truck ownership, they would have to rely on the unpredictable availability of for-hire carriers during harvest. We asked that the FMCSA issue a written policy addressing the nature of implements of husbandry (farm equipment) relative to the definition of a "commercial motor vehicle" when that equipment is operated on a public road. No such vehicle--whether being used in fieldwork operations, being used to transport production inputs, or being used to transport crops or livestock to storage or market--should be considered to be a "commercial motor vehicle" nor subject to the MCSR. Instead, it should be the purview of the States to regulate those vehicles on all highways within the State's borders.

IMPACTS AT THE FARM IMPLEMENTS OF HUSBANDRY

Implements of husbandry used on public roads should not be considered "commercial motor vehicles" under the MCSR. It is apparent that Congress and early regulators had not intended this specialized farm equipment be subject to those regulations. The specificity of Part 393 alone (parts & accessories) precludes the regulation's applicability to farm equipment.4 States, too, have recognized that difference and have regulated implements of husbandry separately from trucks and trailers. Many Illinois farmers--especially our smallest farm operators--rely on farm tractors and farm wagons to deliver their crops and livestock to local markets. Prohibiting the use of implements of husbandry for this purpose (as is

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Interstate v. Intrastate--The designation as an interstate carrier: 1. Triggers the requirement to register for a USDOT number. 2. Triggers applicability of the Unified Carrier Registration (UCR), including annual fees.5 3. Precipitates New Entrant Audit6 4. Jeopardizes the exemptions that federal rules allow states to offer only to intrastate carriers. Crop-Share & For-Hire--The designation as a for-hire carrier: 1. Voids all farm exemptions under the MCSR 2. Requires the farmer to have a Commercial Drivers License (CDL)7.

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Many of the equipment requirements--designed for trucks and trailers--could not practically be retrofitted to implements of husbandry.

Fees are used to enforce federal MCSR. Farmers are required to pay at same annual rate as high-annual mileage over-the-road truckers. Cost to low-mileage farm operations is disproportionate to their limited exposure to on-road safety issues. 6 Carriers issued a USDOT number will automatically be audited within 18 months--a mandate under federal law. 7 Generally, if operating equipment over 26,000 pounds.

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3. Requires the farmer to be enrolled in a drug & alcohol screening program.8 4. Requires the farmer to submit to a bi-annual DOT physical. 5. Voids hours of service exemptions intended for farmers during panting and harvest seasons. 6. Requires the farmer/carrier to maintain the higher levels of insurance coverage mandated for for-hire carriers.9 Implements of Husbandry--If operating in "interstate commerce" as now defined, the designation of implements of husbandry as "commercial motor vehicles" would: 1. Apply all MCSR to farm equipment (implements of husbandry) over 10,000 pounds. 2. Require on-road farm tractor drivers to hold a CDL.10 3. Prohibit farm youths under age 21 from driving tractors on public roads.11 4. Require on-road farm tractor drivers to be enrolled in a drug and alcohol screening program.12 5. Require on-road farm tractor drivers to submit to a bi-annual DOT physical. 6. Effectively prohibit use of most implements of husbandry on public roads.13

Overall--The combined impacts of these three interpretations is difficult to measure, or even fully imagine. Structurally, it could reshape relationships between landlords and their tenant farmers via changes in lease agreements. This, in turn, could spur competition for the land with outside producers injecting bids for cash rent acres. The family nature of the farm would have to be adjusted to account for the new, more-limited role that farm youth could play in moving equipment from farmstead-to-field, field-to-field and farm-to-market. Workers hired to help with farm equipment operation would often have to hold a CDL, forcing farmers to compete with the trucking industry for personnel. Small farmers who currently rely on tractor and wagons to move crops to market might throw in the towel. They could either give up on farming entirely or dramatically shift their enterprise to production that did not require movement of bulk goods. Farmers of all sizes who are frustrated by regulation and red tape could retire from operating the farm, instead leasing their land and facilities to other farmers. Older farmers would likely retire; younger farmers would likely enter the job market and compete for off-farm employment. Pushing farms into the "for-hire" status adds costs and management demands that many operators might attempt to offset by exercising their new status and offering for-hire trucking services in the off-season--competing with existing truckers. Any limitation on the movement of implements of husbandry on public roads would stifle Midwestern agriculture. At its ultimate interpretation and with strict enforcement, that restriction would shut down the state's largest industry.

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Any driver who is required to have a CDL is also required to be enrolled in a drug & alcohol screening program. 9 The cost of for-hire coverage is substantially higher than that for a private, farm-based carrier. 10 Assumes operation in interstate commerce as currently defined for grain hauling, thus voiding a state's ability to waive the CDL requirement as an intrastate driver. 11 See the footnote immediately above, along with the fact that federal regulations require interstate CDL drivers to be age 21. 12 Any driver who is required to have a CDL is also required to be enrolled in a drug & alcohol screening program. 13 Due to the implement's inability to be retrofitted to meet equipment requirements under the Parts and Accessories section of MCSR part 393.

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