Marketing Orders and the Obligations They Place on Handlers
A federal marketing order is industry regulation adopted by the industry itself and enforced by the government. It reaches handlers rather than growers, it can control what may be shipped and in what quantity, and a handler who disagrees has one route to challenge it.
The rule in short
A marketing order is issued by the Secretary of Agriculture after a hearing and a producer referendum, and binds every handler of the regulated commodity in the defined area. Orders may impose grade, size, quality and maturity requirements, volume controls, container and pack rules, reporting and assessments, and research and promotion. Handlers may challenge an order or an obligation under it by petition to the Secretary, followed by review in district court.
A marketing order is a regulation with an unusual origin. The industry proposes it, the department holds a hearing on it, producers vote on it, and once issued it binds every handler in the production area whether that handler voted for it, against it, or not at all. Compliance is not optional and is not a term of any contract.
Proposal, hearing and referendum
The process begins with an industry proposal. The department publishes notice of a hearing, takes evidence on whether an order would tend to effectuate the declared policy of the statute, and issues a recommended decision. If the decision favors an order, it goes to a producer referendum.
The approval threshold is set by statute and varies by commodity. For most commodities the order is approved when two-thirds of producers voting approve it, or when producers of two-thirds of the volume represented in the referendum approve it. Certain commodities carry a higher threshold. Cooperatives may vote on behalf of their members where the cooperative is qualified to do so, which concentrates a large share of the vote in a small number of ballots.
Amendments follow the same route: hearing, decision, referendum. Termination does too, and most orders are subject to periodic continuance referenda in which producers decide whether to keep the order in force.
Handlers, producers and the point of regulation
The order regulates handlers — those who receive, ship, pack or process the commodity for market. Producers are not directly subject to the order's terms, and the statute does not impose obligations on them in the way it does on handlers. The effect on producers is nonetheless direct, because a handler who cannot ship a grade or size will not buy it.
Regulating at the handler level is a deliberate design choice. There are fewer handlers than growers, they keep records, and inspection at the packing line is feasible in a way that inspection in the field is not. It also explains why the challenge route belongs to handlers: they are the regulated parties.
A handler who believes an order or any obligation imposed under it is not in accordance with law files a petition with the Secretary and receives a hearing before an administrative law judge. Only after that ruling may the handler seek review in the district court for the district where it has its principal place of business. A handler who skips the petition and files suit is ordinarily sent back to exhaust it, and in the meantime the obligation continues to accrue with penalties.
The regulatory tools an order may use
| Tool | What it controls | How compliance is verified | Effect on a handler |
|---|---|---|---|
| Grade, size, quality and maturity | What may be shipped to the regulated market | Mandatory inspection and certification before shipment | Product below the standard is diverted, processed or destroyed |
| Container and pack requirements | The form in which the commodity may be shipped | Inspection at the packing facility | Packaging inventory must match the current rule |
| Volume control | The quantity that may enter the fresh market | Allotments, reserve pools and shipment reporting | Portions of the crop held back, diverted or released later |
| Assessments | Funding for administration and authorized programs | Reports of quantity handled, audited by the committee | Per-unit charge on the volume handled, with late charges |
| Research and promotion | Generic marketing and production research | Budget approval and committee accounting | Additional assessment where the order authorizes it |
| Import requirements | Imported lots of listed commodities | Inspection at entry against the domestic standard | Imported product must meet comparable grade, size, quality and maturity |
Volume control is the most powerful and the least used. Where an order authorizes it, the committee may set the portion of the crop that may be shipped to the primary market, holding the remainder in reserve for export, processing, charitable distribution or later release. The mechanism exists to stabilize supply and it is politically contentious for exactly that reason.
Why the milk orders work differently
Federal milk marketing orders share the statutory basis but almost none of the mechanics. Instead of grade and volume regulation, they establish minimum prices that handlers must pay for milk according to the class of use — beverage milk, soft products, cheese, and butter and powder — and then pool the proceeds so producers in the marketing area receive a blend price rather than a price tied to whichever plant bought their milk.
Handler obligations under those orders are accounting obligations: reporting receipts and utilization, paying into or drawing from the pool, and meeting the pooling standards that determine which plants participate. A handler that misclassifies utilization owes the difference, and the audit that finds it typically looks back over several months.
Living with the order day to day
Three duties recur regardless of commodity. Reporting, on the schedule the order sets, of quantities received, shipped and held. Payment of assessments on that volume. And arranging inspection before shipment where the order requires certification, which means coordinating with the inspection service rather than self-certifying.
Penalties for handling in violation are assessed per violation and, for continuing violations, per day. Because handlers are also the collection point for other programs, it is worth keeping the obligations separate in the accounting: an order assessment is not a checkoff assessment, and the two arise under different authority, as described in the checkoff collection and exemption rules.
Order compliance also runs alongside the food safety and labeling regimes rather than substituting for them. A packing operation may be within the produce safety coverage rules, and packaged product carries the elements required by the mandatory label rules. Certified organic product is subject to the organic certification requirements in addition to any order term. None of these displaces the others.
Points to carry away
- An order binds handlers within the production area; producers are bound indirectly through the handlers who buy from them.
- Approval requires a producer referendum meeting the statutory percentage set for the commodity.
- Orders may regulate grade, size, quality, maturity, containers and pack, and may impose volume controls.
- Handlers pay assessments to fund administration and any research and promotion the order authorizes.
- Imports of listed commodities must meet grade, size, quality and maturity requirements comparable to the domestic rule.
- A handler contesting an order must petition the Secretary before seeking judicial review.
Questions readers ask
Can a producer challenge an order directly?
Generally not through the statutory petition route, which is written for handlers. Courts have held that the administrative petition and review scheme is available to handlers and that producers and consumers are outside it, though they may participate in the rulemaking, vote in referenda, and raise other claims where a separate cause of action exists. In practice a producer who objects to an order works through the committee, through the referendum, or through a cooperating handler willing to petition.
What is the committee, and what authority does it have?
Each order is administered by a committee or board of producers and handlers nominated from the industry and appointed by the Secretary. It recommends regulations, prepares the budget, sets the assessment rate subject to approval, collects reports, and oversees inspection arrangements. Its recommendations are not self-executing. Rules take effect when the Secretary issues them, and a committee decision a handler dislikes is challenged through the same petition route as any other obligation under the order.
Do organic and small-volume handlers get relief from assessments?
Some orders exempt handlers of certified organic product from assessments funding generic promotion, and many exempt small quantities from grade and size regulation under stated conditions, such as sales at roadside or in specified container sizes. The exemptions are order-specific and usually require notification and recordkeeping rather than operating automatically. Handlers relying on an exemption should be able to document the volumes and channels that support it, since the committee audits against the reports filed.
Sources
- Cornell Legal Information Institute — 7 U.S.C. 608c, OrdersIssuance, referendum percentages, permitted terms, import requirements and the handler petition.
- eCFR — 7 CFR Part 900, General RegulationsRulemaking, hearing and referendum procedures, and the petition rules of practice.
- eCFR — 7 CFR Part 1000, General Provisions of Federal Milk Marketing OrdersThe classified pricing and pooling structure used in the milk orders.
- Agricultural Marketing Service — Marketing Orders and AgreementsThe active orders, the commodities covered and the committees that administer them.
- Agricultural Marketing Service — Research and Promotion ProgramsThe separate assessment programs frequently confused with marketing order assessments.
- eCFR — 7 CFR Part 11, National Appeals Division Rules of ProcedureThe general departmental appeal framework applicable to other agricultural determinations.
Lawwise is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
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