2013 Ag Retail Outlook: Managing Regulatory Compliance
While increased regulatory activity that often comes from a second-term administration is likely on the way, industry associations may provide refuge for ag retailers.
January 2, 2013
The best way I can describe what 2013 holds for the ag industry is by using the old adage — we're waiting for the other shoe to drop. The old saying means waiting for something bad to happen in which is expected. It comes from a famous music hall joke about a man who is woken by the drunk upstairs dropping his shoe. The man can't get back to sleep because he is waiting for the second crash on the ceiling. I believe most people in the agricultural industry would agree the first shoe dropped shortly after the crash of the economy and the 2008 presidential election.
Politics is an activity that we've purposely chosen to avoid due to the nature of our work. With that said, our workload is directly affected by regulatory activity and we know through experience the second term of any administration, Republican or Democrat, sets the stage as the final chance to complete their agenda — usually at any cost because the outgoing president has nothing to lose.
It became apparent in the spring of 2012 that most of the regulatory activity was being put on hold pending the election. Immediately following election day a burst of activity began when 165 new regulations and notifications were posted to the regulations.gov Website November 9. A standard we’ve come to expect from every re-elected president, regardless of party affiliation. As 2013 unfolds, watch for a tidal wave of regulatory activity comparable only to that of the years following the September 11 tragedy in 2001. During this unfortunate period, a lot of new rules and every unsuccessful rule that had ever been shelved suddenly became viable again once the agency attached the word “security” to it.
In the past four years we have watched as long-standing industry interpretations have been reversed, increasing the numbers of federal agency employees who have felt empowered to inspect and enforce as they see fit, and all while states seek to offset their growing budget deficits by levying additional and even larger fines.
There has been an obvious lack of clarity from regulators at the national level during the course of the last four years. However, we believe that will change, and not necessarily for the better. With clarity will come the expectation by regulators that our industry dot their i's and cross their t's on the myriad of regulations. When it comes to audits and inspections, ignorance of the regulations won't be a viable option anymore and the old fashioned good faith effort won't count for as much as it has in the past. The trend over the last four years leads us to believe the agencies expect to see us “perform” with their performance-oriented standards.
The government may have been considered a little slow in the past, but they are rapidly figuring out how to use technology, such as DOT's Comprehensive Safety Analysis (CSA) to identify the motor carriers that “need to be audited.” DOT audits of the past were quite random unlike the audits conducted since 2010 where the auditor is equipped with a laptop full of data that helps steer him or her directly to the bad actors. Armed with more personnel, watch for the regulator's use of technology to mushroom over the next four to six years.
What can be done while we wait for the other shoe to drop? An all-out effort is recommended to understand the meaning and purpose of the regulations that are required of your business — before the inspector comes knocking. Given the growing number of inspections and audits anticipated in the future, it will be essential that the personnel at the facility know what their regulatory requirements are and be able to interact effectively with the regulator, providing them with the necessary documentation.
One lifeline we have as an industry are our state and national agribusiness associations. These organizations advocate on behalf of our industry every day and have a direct effect on our future. There is no better time than now to review your compliance effort and work with these organizations to take whatever actions may be necessary to be properly prepared for what the future holds.
Whether viewed through an economic, regulatory or business lens, the situation our industry faces for the next four to six years is far from a level playing field. When the other shoe does drop, your perspective of whether the future is positive or negative may very well depend on just how well you are able to manage your risks — in addition to all the other aspects of managing a successful business.
Summers is president of The Asmark Institute.