Virginia Law

Chapter 20. Regulations for the Control and Supervision of Virginia's Milk Industry

2VAC15-20-10. Definitions.

The following words and terms, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise.

"Administrator" means the administrator of the State Milk Commission.

"Affiliate" means any person having control over a distributor.

"Aggregated base" means the total base of a cooperative association's members.

"Approving authority" means the commissioners of the State Milk Commission.

"Assigned daily base" means the lesser of:

1. The monthly pounds of base assigned to a licensed processing general distributor divided by the number of days in the month, or

2. The monthly pounds of Class I allocated to the assigned producer's base deliveries plus 8.0% divided by the number of days in the month.

"Base" means a specified amount of milk which a dairy farmer shall supply periodically and which a distributor shall purchase. Base may be expressed in terms of whole milk or the components of whole milk.

"Base adjusting period" means that time period, specified by regulation, which is used to compare a licensed producer's average monthly production of marketable milk during that period to his established base.

"Base deliveries" means the amount of milk delivered by an individual or a group of base holding dairy farmers which is equal to the bases assigned or the actual deliveries, whichever is less.

"Base establishing period" means the number of months, specified by regulation, used to determine the productive capacity of a new producer for the purpose of allocating base.

"Books and records" means all data, however recorded, pertaining to the business of the person in question.

"Class I" means fluid milk products sold for consumption in approving authority controlled markets or to licensed distributors which sell these products in such markets. Class I products include whole milk, low-fat milk, nonfat milk, flavored milk and buttermilk.

"Class I-A" means products which meet the requirements for Class I fluid milk products but are sold outside of approving authority controlled markets.

"Class II" means products which are not typically fluid milk products or, if in fluid form, have a butterfat content higher than Class I products. Sales of fluid milk products used in commercial cooking and baking processes are classified as Class II products.

"Commission" means the State Milk Commission of Virginia.

"Consumer" means any person other than a milk distributor who purchases milk.

"Cooperative association" means any association of producers, incorporated under state law and qualifying for exemption under the provisions of the "Capper-Volstead Act" (7 USC § 291 et seq.), which the approving authority determines to have full authority for the marketing of milk and dairy products of its members.

"Daily base" means an amount determined by dividing a producer's established base by the number of days in the applicable month.

"Delivery period" means the calendar month.

"Distributor" means any person selling, marketing, or distributing milk or milk products other than at retail in the Commonwealth of Virginia.

"Distributor milk" means any skim milk or butterfat contained in milk received from other licensed distributors, except producer general distributors.

"Filled milk" means any combination of nonmilk fat with skim milk so that the product resembles a fluid milk product.

"Fluid milk product" means all processed, pasteurized, and packaged milk, skim milk (including concentrated and reconstituted skim milk), butterfat, milk drinks (plain or flavored), cream, and any mixture of skim milk and cream (except ice milk mix, ice cream mix, frozen dessert mix, and eggnog) in fluid form for sale or consumption with a butterfat content less than 6.0%. It is labeled as milk according to U.S. Food and Drug Administration (FDA) or U.S. Department of Agriculture (USDA) Milk Marketing Order System standards.

"Licensee" means a licensed milk distributor or milk producer.

"Market" means a geographic region considered as a place for sales designated by the approving authority.

"Milk" means the clean lacteal secretion obtained from healthy cows, including milk that is cooled, pasteurized, standardized or otherwise processed with the intention of selling it as fluid milk product.

"Milk commission base" means the number of pounds established by the approving authority in relation to the total average monthly pounds of Class I sales.

"Other source milk" means all skim milk and butterfat contained in or represented by:

1. Receipts (including any Class II products produced in the distributor's own plant in a prior month) which are reprocessed, converted, or combined with a fluid milk product during the month.

2. Receipts from producer general distributors.

3. Receipts from any source other than licensed producers or other licensed distributors.

"Processing general distributor" means a person engaged in the business of receiving, pasteurizing, processing, packaging and distributing fluid milk. All processing general distributors shall maintain permits required by appropriate health authorities.

"Producer" means any person who produces milk for sale as fluid milk product and has been licensed by the approving authority.

"Producer general distributor" means a distributor who pasteurizes, processes, packages and distributes only milk produced by himself and has Class I sales at less than 5.0% of the market or markets in which he operates. All producer general distributors shall maintain permits required by appropriate health authorities.

"Producer milk" means any skim milk or butterfat contained in raw milk received directly from producers or for the account of producers.

"Producing unit" means a Grade "A" dairy farm.

"Sanitary regulations" means all laws and ordinances relating to the production, handling, transportation, distribution and sale of milk.

"Subsidiary" means any person controlled by a distributor, an affiliate, or a group of distributors.

"UHT" means a product hermetically sealed in a container and so thermally processed as to render the product free of viable microorganisms, including spores, of public health significance. UHT products as defined in this chapter shall meet the definition for aseptic processing and packaging and do not require refrigeration. Aseptic processing and packaging means the filling of a commercially sterilized cooled product into presterilized containers followed by aseptic hermetical sealing with a presterilized closure in an atmosphere free from microorganisms.

"Ultrapasteurized" means, when used to describe any milk or milk product, milk or milk products thermally processed at a temperature of 280°F (138°C) or hotter for at least two seconds, either before or after packaging, so as to produce a product that has an extended shelf life under normal refrigerated storage.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 1, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-20. (Repealed.)

Historical Notes

Derived from VR475-02-02 § 2, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; repealed, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-21. Statement of purpose.

This chapter provides for the supervision, regulation and control of the production, processing, transportation, storage, distribution, and sale of milk and cream; protects the well-being of the people of the Commonwealth of Virginia; and promotes the public interest.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-30. Establishment of Virginia market sales areas.

A. This chapter shall apply to all established Virginia market sales areas, unless otherwise stated, and is applicable to the commercial use of milk.

B. The following market sales areas are established and shall include the geographical territories indicated:

1. "Eastern Virginia sales area" means the territory included within the boundaries of the counties of Accomack, Amelia, Brunswick, Buckingham, Caroline, Charles City, Charlotte, Chesterfield, Cumberland, Dinwiddie, Essex, Gloucester, Goochland, Greensville, Halifax, Hanover, Henrico, Isle of Wight, James City, King and Queen, King George, King William, Lancaster, Lunenburg, Mathews, Mecklenburg, Middlesex, New Kent, Northampton, Northumberland, Nottoway, Powhatan, Prince Edward, Prince George, Richmond, Southampton, Surry, Sussex, Westmoreland, and York; as well as the territory included in the cities of Chesapeake, Colonial Heights, Franklin, Hampton, Hopewell, Newport News, Norfolk, Petersburg, Portsmouth, Richmond, South Boston, Suffolk, Virginia Beach and Williamsburg.

2. "Southwestern Virginia sales area" means the territory included within the boundaries of the counties of Bland, Buchanan, Dickenson, Lee, Russell, Scott, Tazewell, Washington, and Wise; as well as the territory included in the cities of Bristol and Norton.

3. "Western Virginia sales area" means the territory included within the boundaries of the counties of Albemarle, Alleghany, Amherst, Appomattox, Augusta, Bath, Bedford, Botetourt, Campbell, Carroll, Clarke, Craig, Culpeper, Fauquier, Floyd, Fluvanna, Franklin, Frederick, Giles, Grayson, Greene, Henry, Highland, Louisa, Madison, Montgomery, Nelson, Orange, Page, Patrick, Pittsylvania, Pulaski, Rappahannock, Roanoke, Rockbridge, Rockingham, Shenandoah, Smyth, Spotsylvania, Stafford, Warren, and Wythe; as well as the territory included in the cities of Buena Vista, Charlottesville, Clifton Forge, Covington, Danville, Fredericksburg, Galax, Harrisonburg, Lexington, Lynchburg, Martinsville, Radford, Roanoke, Salem, Staunton, Waynesboro and Winchester.

C. The following Virginia geographical territories are not included within defined Virginia market sales areas:

The territory included within the boundaries of the counties of Arlington, Fairfax, Loudoun, and Prince William; as well as the territory included in the cities of Alexandria, Annandale, Arlington, Fairfax, Manassas, Manassas Park, McLean, Reston, Springfield, and Tysons Corner.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 3, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-40. Producers' license and base; establishment.

This section shall apply to all established marketing areas and the combination of all markets shall be considered as a single unit for the purpose of this section.

A.1. Total milk commission base pounds shall be established in relation to the total average monthly pounds of Class I sales. Effective March 1 of each year the total base pounds established shall not exceed 108% of the average monthly pounds of Class I sales for the preceding calendar year, excluding the months of June, July, and August.

2. The total milk commission base pounds established for the months of June, July and August shall be determined by multiplying the pounds of total base computed pursuant to subdivision 1 above by a percentage; that percentage shall be determined by dividing the average monthly Class I sales for the months of June, July and August of the previous year by the average monthly pounds of Class I sales for the previous calendar year, excluding the months of June, July and August.

3. The total pounds of established base shall be issued equitably to producers licensed by the commission.

4. Only one license and base shall be issued to the owner or owners of each producing unit.

5. Base shall not be issued to any producer operating as a producer-distributor. Producer-distributors that have been in continuous operation for 10 or more consecutive years who discontinue distributing milk and continue as producers shall have a base established and issued to them by the commission on an equitable basis with all other producers.

B.1. New producers shall be licensed and have bases established in accordance with the provisions of this chapter provided there is a need for additional milk for Class I sales. On or before January 15 of each year, the commission shall give written notice to all cooperative associations with baseholding producers of the need for additional base.

2. Applications for producers' license and base shall be filed with the commission each year between January 1 and February 1 on forms provided by the commission. Applications will not be accepted prior to January 1 or subsequent to February 1 of each year. Bases shall be offered to applicants in the order of lots drawn by the commission at the first meeting held subsequent to February 1 of each year. After the establishment and issuance of new bases is completed, all remaining applications and all unused lots shall be destroyed.

3. Applicants who agree to accept a base shall be licensed and entered into a one month base-establishing period by the commission, after an investigation and hearing before the commission indicates that the applicant will provide a new source of Grade "A" milk for commission markets.

4. A new producer shall have a base issued at the conclusion of the base-establishing period to be effective on the first day of said base-establishing period. Such base shall be the lesser of the following:

a. Deliveries during the base-establishing period, or

b. The pounds of base specified in accordance with subdivision C 2 d of this section.

5. Bases issued in accordance with the provisions of this subsection shall not be transferable or consignable during the first 36 months after being issued, except in the event of total physical or mental disability or death of the baseholder.

6. Producers who are members of a cooperative association may consign their total base pounds to their cooperative association provided they have been licensed baseholders for three consecutive years immediately prior to the effective date of the consignment. Producers desiring to consign their base pounds to their cooperative association shall notify the commission in writing not less than 15 days nor more than 60 days prior to the effective date of such consignment.

7. Cooperative associations that have been designated as the consignee of the member's base shall notify the commission in writing of the name(s) of one or more of its members to whom a consigned base shall be reissued within 30 days subsequent to the cessation of production by the consignor.

8. Cooperative associations may, subject to the commission's written approval, relinquish their total consignment of all members' base or the total base consignment of individual members.

C. 1. The total pounds of base issued to producers shall be adjusted (including base loss adjustments) effective March 1 of each year. Bases issued to existing producers shall be adjusted with reference to the average deliveries of merchantable milk which meets the requirements of health authorities having jurisdiction during the base-adjusting period, which shall consist of the months of September, October, and November of the preceding year. Said deliveries shall only include milk from a producer's own licensed production unit.

2. Bases issued to producers shall be adjusted as follows:

a. If the average monthly delivery of a producer during the base-adjusting period is less than his base existing on the last day of the base-adjusting period, his new base shall be his average monthly deliveries during the base-adjusting period.

b. If the average monthly deliveries of a producer during the current base-adjusting period is in excess of his base existing on the last day of the base-adjusting period, such producer shall be eligible for additional base as follows:

(1) Any base loss sustained by a producer during the preceding base-adjusting period shall be restored to that producer to the extent that his average monthly deliveries during the current base-adjusting period exceeds his base existing on the last day of the base-adjusting period, however, in no event is the base restored to exceed the base loss.

(2) A producer (including those who recovered base loss) shall be eligible for additional base in proportion to his average deliveries during the base-adjusting period in excess of his base existing on the last day of the base-adjusting period, plus any loss recovered under subdivision (1) above. Average deliveries in excess of 125% of the producer's base existing on the last day of the base-adjusting period, plus any base loss recovered under subdivision (1) above shall not be used in determining such producer's eligibility for additional base.

c. Whenever all bases are reduced by commission action, no base shall be issued to new producers until the total base reduction sustained by currently licensed baseholding producers has been restored.

d. The following method shall be used to allocate base increases:

(1) Fifty percent rounded to the nearest unit of 30,000 pounds to be allocated to new producers. The resulting amount shall be offered in units not to exceed 30,000 pounds per producer to new producers in accordance with the provisions of subdivision B of this section. In the event that new producers do not absorb the entire amount offered under this provision the remainder thereof shall be allocated to producers under subdivision (2) following.

(2) The remainder of the base increase shall be allocated to existing baseholding producers in accordance with the provisions of subdivision 2 b (2) of this subsection.

D.1. Base shall be assigned to licensed general distributors and reassigned when necessary from one distributor to another to equitably apportion base among distributors according to each distributor's Class I sales and in accordance with the number of days in each calendar month.

a. For purposes of assignment of base to distributors the bases of all members of a cooperative association shall be aggregated and such base assigned in such increments as necessary when application from the cooperative association concerned to do so is approved by the commission.

b. Base of individual producers who are not members of cooperative associations, or base of members of cooperative associations, when subdivision D 1 a above is not followed, shall be assigned in its entirety.

2. Base assigned to a distributor shall be reassigned to another distributor only upon written notification to all persons concerned that such reassignment has been directed by the commission.

3. Distributors shall not accept producer milk until the base which it represents is assigned to them by the commission and they are so notified in writing.

4. The producers with bases assigned to licensed distributors who are fully regulated by a Federal Milk Marketing Order shall be paid a price not less than the applicable uniform price of the Federal Milk Marketing Order under which the distributor is fully regulated provided, however, that if the appropriate market Class I price established by the commission exceeds the Class I price of the applicable Federal Milk Marketing Order then the assigned baseholding producers, or their agents, shall be paid an additional amount equal to the Class I differential existing between the appropriate Federal Milk Marketing Order Class I price and the appropriate State Milk Commission market Class I price, multiplied by the hundredweight of Class I sales allocated in accordance with the provisions of 2VAC15-20-80.

5. For base assignment purposes only the following methods shall be used to adjust the base assignments in accordance with the number of days in each calendar month:

a. The total base pounds assigned to all licensed general distributors during each month of the nine month period (September through May) shall be an amount determined by multiplying the number of days in the calendar month by a number calculated in accordance with the following procedure:

Multiply by nine the total pounds of monthly base established for the nine month period (September through May) and divide the product by the total number of days in the nine month period (September through May).

b. The total base pounds assigned to all licensed general distributors during each month of the three month period (June, July and August) shall be an amount determined by multiplying the number of days in the calendar month by a number calculated in accordance with the following procedure:

Multiply by three the total pounds of monthly base established for the three month period (June, July and August) and divide the product by the total number of days in the three month period (June, July and August).

E. Transfers of base issued to licensed producers.

1. The total unconsigned base of a producer may, upon written request to the office of and approval by the commission, be transferred to existing unconsigned baseholding producers or to prospective producers if such persons have met the requirements of the health authorities having jurisdiction provided:

a. That the entire base of the transferring producer or his entire part thereof, is transferred at the same time,

b. That the producer license of the transferring producer shall be cancelled,

c. That any producer who transfers his entire base from a producing unit to other baseholding producers or prospective baseholding producers shall be ineligible during the next twelve months to hold a Milk Commission license or base on the producing unit from which the base was transferred,

d. That the written request shall include the exact pounds to be transferred to each existing baseholder or each prospective producer with the total pounds to be transferred being equal to the total existing base of the transferring producer, and

e. For all months except February, total base transfer requests received from the first through the 15th day of a month shall become effective on the 16th day of that month. Total base transfer requests received from the 16th day of a month through the last day of that month shall become effective on the first day of the following month. Total base transfer requests received from the first through the last day of February shall become effective on the first day of March.

2. Any portion less than a producer's total unconsigned base may upon written request to the office of and approval by the commission be transferred to existing unconsigned baseholding producers or to prospective baseholding producers if such persons have met the requirements of the health authorities having jurisdiction, provided:

a. That no partial base transfers shall be permitted during the base-adjusting period,

b. For all months except February and the base-adjusting period, partial base transfer requests received from the first through the 15th day of a month shall become effective on the 16th day of the month. All partial base transfer requests received from the 16th day of a month through the last day of that month shall become effective on the first day of the following month. Partial base transfer requests received from the first through the last day of February shall become effective on the first day of March, and

c. That any producer who reduces his base by a partial base transfer shall be ineligible at anytime during the next 12 months to increase his base by a base transfer.

3. A producer holding a base or a part thereof may, subject to the approval of the commission, retain same when he moves his entire herd or his entire part thereof, from one farm to another.

4. For base adjustment purposes all base transfers occurring between September 1 and March 1, the transferree shall be credited with the lesser of:

a. An amount of monthly production equal to the number of pounds of base transferred, or,

b. The prorata share of the average monthly production during the base-adjusting period of the transferror.

5. For all base transfers subject to a March 1 base reduction resulting from deficient production of the transferror during the base-adjusting period, the transferror shall notify all transferrees of the pounds of their base transfer subject to the reduction when a base transfer approval is requested.

6. All Milk Commission base is subject to the following restrictions:

a. Only Grade "A" producers may own or transfer commission base.

b. Only Grade "A" producers with unconsigned base, or prospective Grade "A" producers, may acquire base by transfer.

c. All base transfers and acquisitions are subject to the commission's approval which may require the producer or division manager of the producer's cooperative association to submit an affidavit providing information pertinent to the transfer or acquisition.

7. Cooperative associations that have been designated as the consignee of a member's base may transfer any part of a member's consigned base to another member or members of the association from December 1 through August 16 of each year. Total base transfers of consigned base shall be made in accordance with subdivision B 7 of this chapter.

F. Cancellation of base issued to licensed producers:

1. The commission may suspend or revoke a base or license, or both, held by a producer upon due notice to the producer and after a hearing, when the commission is convinced from the evidence that such baseholding producer has knowingly violated any of the provisions of this chapter.

2. The license and base of a producer shall be cancelled if he fails for a period of 30 or more consecutive days to make delivery of milk that meets the requirements of the health authorities having jurisdiction and does not during that period provide the commission, in writing, a reasonable explanation for such failure and indicate a present ability and willingness to continue to deliver such milk.

3. During any delivery period if a cooperative association that has aggregated its members' bases in accordance with subdivision D 1 a of this chapter, fails for a period of 30 or more consecutive days to make delivery of milk that meets the requirements of the health authorities having jurisdiction and does not during that period notify the commission of its reasons for such failure, the total aggregate base of that association shall be reduced by the amount of base assigned to the distributor to which the association failed to make delivery and the base of each baseholding member of that association shall be reduced by his prorata share of the total reduction.

4. The license and base of a producer shall be cancelled prior to granting him a distributor's license.

G. Commission Order No. Twelve. No licensed general distributor shall be required to accept an assignment of base for class I sales of UHT products sold in commission markets.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 4, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991.

2VAC15-20-50. Delivery and acceptance requirements for all established marketing areas.

A. Deliveries shall conform to the following:

1. Producers shipping on a daily basis shall deliver in each delivery an amount of milk at least equal to their daily base, if produced. Producers shipping on an every other day basis shall deliver in each delivery an amount of milk at least equal to twice their daily base, if produced.

2. Deliveries other than in accordance with subdivision 1 of this subsection shall be subject to the pricing procedures of 2VAC15-20-80 A 4.

B. Milk delivered and accepted during a delivery period shall conform to the following:

1. Producers shall deliver within a delivery period an amount of milk at least equal to their base, if produced, and the processing general distributor concerned shall accept such deliveries.

2. A cooperative association operating under the provisions of 2VAC15-20-40 D 1 a shall deliver within a delivery period an amount of milk at least equal to the aggregated base of its members which is assigned and the processing general distributor concerned shall accept such deliveries.

3. Cooperative associations operating under the provisions of 2VAC15-20-40 D 1 a shall not be required to make daily deliveries in quantities less than the full volume of tankers that are currently in use by the cooperative associations.

C. Other delivery arrangements not in conflict with this chapter may be mutually agreed upon by producers or cooperative associations and the processing general distributor concerned.

D. Production in excess of base assigned is not required to be delivered by producers or cooperative associations, or accepted by the processing general distributor concerned.

E. Cooperative associations may fulfill the delivery obligations of any of their base holding members.

F. Milk delivered in accordance with this chapter shall not be rejected by processing general distributors so long as the milk is marketable and meets the requirements of the health authorities having jurisdiction and previously published standards of the processing general distributor.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 5, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-60. Classification and requirements of distributor licenses.

A. A distributor must have obtained the applicable license.

B. Applicants for licenses shall submit applications in accordance with the approving authority's requirements. Applications must be approved before applicants can handle or sell milk. An applicant may receive temporary license from the administrator to operate as a licensed distributor provided the following conditions are met. The applicant must submit a written request to the administrator stating:

1. A request for temporary license be granted until the agency receives and processes a properly completed application.

2. The reasons for the need for license.

3. An agreement to abide by all laws and regulations governing the sale of milk in Virginia.

4. An agreement to properly account for receipts and utilization of all fluid milk and cream in Virginia and pay appropriate assessments.

C. Applications for license shall be reviewed and investigated for accuracy by the agency. The administrator shall hold an informal conference with the applicant and any interested parties for the purpose of determining the accuracy of the information submitted and to clarify any issues involving the application for license. These conferences shall be held in a manner prescribed by the administrator.

D. The administrator shall review all pertinent information regarding applications for distributor license with the approving authority for their approval.

E. Licenses issued to distributors are classified as follows:

1. Processing general distributor;

2. Distributor;

3. Producer general distributor; and

4. Retail distributor.

Retail distributor licenses are classified as those granted to all other persons engaged in the business of a "distributor." All such persons shall be considered to be licensed by the approving authority until this license is suspended or revoked; however, no formal certificate of license is required or will be issued unless an application for such license is filed with the approving authority.

F. The approving authority may decline to grant a license and may suspend or revoke a license after at least 10 days' notice and a hearing for any of the following reasons:

1. The applicant or licensee is not qualified to properly conduct the business.

2. The applicant or licensee has made a false statement or inaccurate report of a material fact to the approving authority.

3. The applicant or licensee is insolvent, has made a general assignment for the benefit of creditors or has a money judgment secured against him upon which execution has been returned wholly or partly unsatisfied.

4. The applicant or licensee has violated any provision or provisions of this chapter.

5. The purpose of the application for any type of license is to circumvent any established prices promulgated by the approving authority.

6. The applicant for a processing general distributor license or a licensed processing general distributor does not have facilities adequate to handle assigned milk from licensed producers.

7. The licensee has rejected assigned milk without reasonable cause.

8. The licensee has failed to account for or make payment for assigned milk.

9. The licensee has failed to keep records or furnish information required.

10. Any requisite health permit has been suspended, terminated or revoked.

11. The licensee has ceased to operate.

12. The licensee's responsible and authorized representatives refuse to appear and testify as to their knowledge of the operations of the licensee.

G. Licenses issued to distributors are not transferable and shall remain in effect until surrendered, suspended or revoked by the approving authority.

H. Processing general distributor and producer general distributor licensees may package and sell fluid milk only under those brands or trade names as filed with the agency. A processing general distributor, producer general distributor or distributor may market, sell or distribute fluid milk products purchased for resale only under those brands as filed with the agency. A licensee shall provide written notification to the agency not less than 15 days prior to the introduction or discontinuance of a brand or trade name.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 6, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-70. Classification and allocation of milk, computation of sales and shrinkage.

This section shall apply to all established marketing areas and all milk and dairy products handled by distributors and shall be presumed to come within the jurisdiction of the approving authority unless proven otherwise by records of the distributors.

A. Classification.

1. Class I milk shall include all skim milk and butterfat in fluid form, including aseptically processed and packaged ultra high temperature pasteurized products (UHT) for human consumption in approving authority defined markets, which is not accounted for as Class II milk, provided that any fluid milk products fortified with added nonfat milk solids shall be Class I in amount equal only to the weight of the equal volume of like unfortified products of the same butterfat content. Eggnog is classified as a Class I product.

2. Class I-A milk shall include all fluid milk products identified in subdivision 1 of this subsection and sold for fluid human consumption in areas other than approving authority defined markets.

3. Class II milk shall include all skim milk and butterfat:

a. Used to produce sterilized products, other than those identified in subdivision 1 of this subsection, butter, cheese (including cottage cheese), yogurt, plastic and frozen cream, sour cream, dips, dry milk (skim or whole), condensed milk (skim or whole), ice cream, ice milk, and frozen desserts, or ice cream, ice milk or frozen dessert mixes, including basic mixtures for use in preparation of ice cream, ice milk, frozen desserts, or ice cream or frozen dessert mixes. All cream sales containing more than 10% butterfat, including half and half cream, light cream and heavy cream.

b. Disposed of for animal feed.

c. Contained in inventory of fluid milk products on hand at the end of the month.

d. Disposed of in bulk to any commercial food establishment for use on the premises in the production of soup, candy, bakery products, or any other nondairy food products.

e. In shrinkage of skim milk and butterfat, respectively, as computed pursuant to subsection B of this section, but not to exceed the following:

(1) Two percent of producer milk received at the distributor's plant, plus

(2) Two percent of milk received at the distributor's plant in bulk tanks from other distributors exclusive of the quantity for which Class II utilization was requested, less 2.0% of milk moved in bulk tanks to another distributor.

f. In shrinkage of skim milk and butterfat, respectively, prorated to other source milk in accordance with subsection B of this section.

4. Skim milk or butterfat contained in any fluid milk products dumped shall be Class II provided that the distributor dumping fluid milk products shall give the agency, during normal office hours, not less than four hours advance notice of his intention to dump such fluid milk products and the quantities to be so disposed.

5. Skim milk and butterfat in fluid form transferred by a distributor to another distributor shall be classified as follows:

a. Skim milk and butterfat in packaged fluid milk products shall be classified as Class I-A or Class I in accordance with the requested and agreed upon classification by the transferring and receiving distributors, provided that:

(1) The skim milk and butterfat so assigned to each class shall be limited to the appropriate class utilization remaining in the plant of the receiving distributor after computations have been made according to subsection D of this section; and

(2) Other source milk in the transferring plant is not allocated to Class I as a result of such classification of transferred milk.

b. Skim milk and butterfat in bulk fluid form shall be classified as Class II, provided that:

(1) The skim milk and butterfat so assigned to each class shall be limited to the appropriate class utilization remaining in the plant of the receiving distributor after computations have been made according to subsection D of this section; and

(2) Other source milk in the transferring plant is not allocated to Class I as a result of such classification of transferred milk.

c. Skim milk and butterfat in bulk fluid form shall be classified as Class II milk if transferred by a distributor to a plant which is not licensed as a distributor by the approving authority.

d. Skim milk and butterfat in packaged fluid form shall be classified as Class I-A if transferred to a fluid milk plant which is not licensed as a distributor by the approving authority.

6. Shrinkage in excess of that allowed to be classified as Class II in accordance with subdivision 3 e of this subsection shall be prorated over a distributor's Class I and Class I-A sales as follows:

a. Compute the total excess shrinkage of skim milk and butterfat, respectively, by subtracting the total amount of skim milk and butterfat classified as Class II under provision of subdivisions 3 e and f of this subsection, from the total shrinkage as determined in accordance with subdivision B 1 b of this section.

b. Prorate skim milk and butterfat excess shrinkage, respectively, obtained in subdivision 6 a of this subsection between (i) skim milk and butterfat sold in Class I products and (ii) skim milk and butterfat sold in Class I-A products.

B. Computation and allocation of shrinkage. Shrinkage shall be allocated over a distributor's receipts from all sources as follows:

1. Compute the total shrinkage of skim milk and butterfat, respectively, by subtracting the total amount of skim milk and butterfat accounted for from the total amount of skim milk and butterfat to be accounted for; and

2. Prorate skim milk and butterfat shrinkage, respectively, obtained in subdivision 1 a of this subsection, between (i) skim milk and butterfat in producer receipts as defined in 2VAC15-20-10 and (ii) skim milk and butterfat contained in other source milk as defined in 2VAC15-20-10.

C. Computation of skim milk and butterfat in each class.

1. For each month the total pounds of skim milk and butterfat utilized in each class shall be reported by each distributor to the agency on forms specified by the agency.

2. Computation of skim milk and butterfat used in each classification shall be made in accordance with the conversion factors specified by the approving authority on the forms used for computation and reporting of utilization provided that in the case of products not listed on these forms, the conversion factor used by a distributor shall be approved by the approving authority.

3. If any of the water contained in the milk from which a product is made has been removed before the product is received, utilized or disposed of by a distributor, the pounds of milk to be accounted for shall be the weight of the total milk solids in the product plus all of the water originally associated with the solids.

D. Allocation of skim milk and butterfat utilized.

1. Skim milk shall be allocated as follows:

a. Subtract from the total pounds of skim milk in Class II the pounds of skim milk classified as Class II under subdivision A 3 e of this section.

b. Subtract from the total pounds of skim milk in each class, in series beginning with Class II, the pounds of skim milk in the inventory of fluid milk products on hand at the beginning of the month, and the pounds of skim milk in beginning inventory that was subtracted from Class I the preceding month.

c. Subtract from the remaining pounds of skim milk in each class the pounds of skim milk in Class I-A requested products received in packaged form from other distributors as follows:

(1) From Class I-A, the lesser of the pounds remaining in Class I-A, or such receipts; and

(2) From Class I, the remainder of such receipts, with reclassification of this quantity in the transferring plant.

d. Subtract from the remaining pounds of skim milk in each class the pounds of skim milk in Class I requested products received in packaged form from other distributors as follows:

(1) From Class I, the lesser of the pounds remaining in Class I, or such receipts; and

(2) From Class I-A, the remainder of such receipts, with reclassification of this quantity in the transferring plant.

e. Subtract, in the order specified below, from the pounds remaining in each class, in series beginning with Class II, next Class I-A, and then Class I, the pounds of skim milk in each of the following:

(1) Other source milk in a form other than that of a fluid milk product.

(2) Receipts of fluid milk products from a producer-distributor.

(3) Other source milk in the form of fluid milk products.

(4) Receipts of fluid milk products in bulk from other distributors; however, if the pounds remaining in each class are less than the quantity of bulk milk remaining to be allocated, then the remaining quantity must be subtracted from the next highest use classification with reclassification of this quantity in the transferring plant.

(5) Receipts of fluid milk products from other distributors not already allocated.

f. Add to the remaining pounds of skim milk in Class II the pounds subtracted pursuant to subdivision 1 a of this subsection.

g. If the pounds of skim milk remaining in all classes exceeds the pounds of skim in producer milk, subtract such excess from the pounds of skim milk remaining in each class in series beginning with Class II. Any amount so subtracted shall be known as "overage."

h. Add to Class I the pounds of skim milk in beginning inventory that was subtracted from Class I the preceding month.

2. Butterfat shall be allocated by the same method specified for skim milk in subdivision 1 of this subsection.

3. Combine the amounts of skim milk and butterfat determined in accordance with the procedures specified in subdivisions 1 and 2 of this subsection into one total for each class and determine the weighted average butterfat content of producer milk in each class.

E. Allocation of classified sales.

1. Producer milk classified as Class I shall be allocated to base deliveries to the extent that base deliveries are available. Producer milk classified as Class I that exceeds base deliveries shall be allocated to excess deliveries.

2. Producer milk classified as Class I-A and Class II shall be allocated to excess deliveries to the extent that excess deliveries are available. Producer milk classified as Class I-A and Class II that exceeds excess deliveries shall be allocated to base deliveries.

3. Producers or cooperative associations shall be paid a base price for base deliveries and an excess price for excess deliveries computed monthly for each distributor in accordance with the following procedure:

a. To determine the excess price for 3.5% milk, add to the value obtained by multiplying the excess deliveries allocated to Class I-A and Class II by the Class II price for 3.5% milk, the value obtained by multiplying the excess deliveries allocated to Class I by the Class I price for 3.5% milk and divide the sum by the total excess deliveries.

b. To determine the base price for 3.5% milk, add to the value obtained by multiplying the base deliveries allocated to Class I by the Class I price for 3.5% milk, the value obtained by multiplying the base deliveries allocated to Class I-A and Class II by the Class II price for 3.5% milk and divide the sum by the total base deliveries.

4. Delivered base shall be determined in accordance with the following:

a. Delivered base for deliveries made in accordance with 2VAC15-20-50 B shall be the assigned base unless deliveries are less than assigned base. When deliveries are less than the assigned base, the delivered base shall be 92% of deliveries.

b. Delivered base for deliveries made in accordance with 2VAC15-20-50 C shall be the lesser of assigned base or deliveries.

5. Excess deliveries for producers or cooperative associations shall be the difference between total deliveries and delivered base.

6. If a producer or cooperative association fails to make delivery of milk or delivers milk which is not merchantable or does not meet the requirements of the health authorities having jurisdiction in the market, the base of that producer or cooperative association shall be reduced by a percentage. That percentage shall be determined by dividing the number of days which the producer or cooperative association failed to make delivery of acceptable milk by the number of days in the delivery period.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 7, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 16, Issue 9, eff. January 1, 2000.

2VAC15-20-80. (Repealed.)

Historical Notes

Derived from VR475-02-02 § 8, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 11, Issue 1, eff. September 13, 1994; Volume 11, Issue 17, eff. May 1, 1995; Volume 13, Issue 2, eff. November 13, 1996; Volume 13, Issue 7, eff. December 1, 1996; Volume 15, Issue 26, eff. August 17, 1999; repealed, Virginia Register Volume 16, Issue 9, eff. January 1, 2000.

2VAC15-20-81. Class prices for producer's milk, time and method of payment, and butterfat testing.

A. CWT Class prices.

1. Class I

The above established Class I prices shall be adjusted automatically in accordance with the following procedure, provided:

(1) a. The Eastern Market Class I price shall not exceed the average prevailing Class I price of Metropolitan Washington, D.C., and Raleigh, North Carolina, by more than $0.80 per hundredweight nor be less than $0.30 per hundredweight above the average prevailing Class I price of Metropolitan Washington, D.C., and Raleigh, North Carolina;

b. The Southwest Market Class I price shall not exceed the average prevailing Class I price of Bristol, Virginia, and Charleston, West Virginia, by more than $0.60 per hundredweight nor be less than $0.30 per hundredweight above the average prevailing Class I price of Bristol, Virginia, and Charleston, West Virginia; and

c. The Western Market Class I price shall not exceed the average prevailing Class I price of Metropolitan Washington, D.C., and Winston Salem, North Carolina, by more than $0.60 per hundredweight nor be less than $0.30 per hundredweight above the average prevailing Class I price of Metropolitan Washington, D.C., and Winston Salem, North Carolina.

(2) Class I prices shall be increased by an amount determined by multiplying the number of two-point brackets that the average bi-monthly composite index exceeds 101.0 by $0.20; and

(3) Class I prices shall be decreased by an amount determined by multiplying the number of two-point brackets that the average bi-monthly composite index descends below 99.0 by $0.20.

(4) The average bi-monthly composite index brackets shall be in accordance with the following schedule:

(5) A monthly composite index shall be determined by dividing the sum of the index numbers of the six factors shown in subsections (a x 1), (b x 1), (c x 1), (d x 1), (e x 1), (f x 2) of this subparagraph by seven. The latest available published monthly data for any of the above six factors shall be used in determining the monthly index number.

a. The U.S. Index of prices paid, taxes, and farm wage rates, as published in "Agricultural Prices" by the U.S.D.A.

b. The U.S. Index of prices received as published in "Agricultural Prices" by the U.S.D.A.

c. The average price per ton paid by Virginia farmers for 16% dairy feed, as published in "Agricultural Prices" by the U.S.D.A.

d. The average cost of the market basket for Richmond-Norfolk-Virginia Beach-Portsmouth, as published in "The Market Basket and Retail Food Prices" by the Virginia Department of Labor and Industry.

e. The average weekly earnings of workers in Virginia manufacturing industries, as published in "Trends in Employment Hours and Earnings Virginia and Statistical Metropolitan Areas" by the Virginia Department of Labor and Industry.

f. An average of the prevailing Class I prices in Raleigh, North Carolina; Metropolitan Washington, D.C.; Winston Salem, North Carolina; Bristol, Virginia; and Charleston, West Virginia.

(6) The six-month average, November 1973 through April 1974, shall equal 100 for each of the above factors for the purpose of determining the monthly index number for each factor.

(7) The current month's Class I price adjustment, if any, shall be determined by a bi-monthly composite index which shall be a simple average of the monthly composite indices of the second and third preceding months.

(8) On or before the 23rd day of each month, the agency shall determine the Class I butterfat, skim and net prices for the following month and announce same to all licensed processing general distributors and on the same date the agency will announce the Class II skim, butterfat and net prices.

Effective May 1, 1995, the following modifications to the indexes will be utilized in determining the monthly composite index used in calculating the Class I price for Virginia State Milk Commission marketing areas pursuant to subdivisions A 1 (1) through (7) of this section:

The U.S. Index of prices paid, taxes, and farm wage rates as published in "Agricultural Prices" by the U.S.D.A. will be determined by using the monthly movement of the reweighted and reconstructed prices paid index (PPITW) as published by the U.S.D.A. The monthly movement of the new prices paid index (PPITW) will be applied each month to the preceding month's revised index of prices paid, taxes, and farm wage rates using December 1994 as the base month.

The U.S. Index of prices received as published in "Agricultural Prices" by the U.S.D.A. will be determined by using the monthly movement of the reweighted and reconstructed prices received index as published by the U.S.D.A. The monthly movement of the new prices received index will be applied each month to the preceding month's revised index of prices received using December 1994 as the base month.

The average price per ton paid by all Virginia farmers for 16% dairy feed as published in "Agricultural Prices" by the U.S.D.A. will be determined by using the monthly movement of the index of prices paid, production items, complete feeds as published by the U.S.D.A. The monthly movement of this index will be applied each month to the preceding month's index of 16% dairy feed, Appalachian using April 1995 as the base month.

The authoritative publisher of the Market Basket for Richmond-Norfolk-Virginia Beach-Portsmouth will be the Virginia Department of Agriculture and Consumer Services. The resultant index numbers derived from the above calculations will be utilized as specified in the cited regulation.

2. Class I-A. The price used in computing each distributor's obligation for producer milk (of 3.5% butterfat) allocated to Class I-A shall be the Class II skim, butterfat, and net prices.

3. Class II. The price per cwt. for all markets shall be the monthly Class II price announced by the market administrator of appropriate marketing area.

4. The total value of base deliveries made in accordance with 2VAC15-20-50 B 2 shall be discounted in accordance with the following procedure to reflect the cost savings of transporting, storing and handling of producer milk on a uniform daily basis:

a. Subtract from each cooperative association's total pounds of base deliveries allocated to Class I sales for each delivery period an amount equal to twice the sum of the differences between the pounds of assigned daily base and the pounds of daily base deliveries which are less than the pounds of assigned daily base for each day during the delivery period.

b. The net hundredweight (not less than zero) resulting from the above procedure multiplied by $0.11 will be the amount of discount for base deliveries during the delivery period.

5. No milk shall be sold or offered for sale by producers or their agents at prices other than those established except milk that is certified by USDA as organic. Milk certified as organic by USDA may have premiums negotiated at a higher price than that announced by the commission.

B. Butterfat testing. Butterfat testing shall be conducted in accordance with the following procedure:

1. General distributors shall determine the average butterfat content of all assigned producer milk delivered by each producer who is not a member of a cooperative association, as defined in 2VAC15-20-10, by four or more tests made at approximately equal intervals during each delivery period.

2. All assigned producer milk accompanied by a bill of lading that is delivered by a cooperative association to a licensed distributor and is accepted by the distributor shall be paid for by the distributor at a rate that is determined by the butterfat test specified on the bill of lading accompanying the load of milk.

3. The butterfat content of all assigned cooperative association milk delivered by methods other than specified in subdivision 2 of this subsection, shall be determined in accordance with procedures specified by the agency if mutual agreement between the cooperative association and the distributor cannot be reached as to the butterfat content of such deliveries.

4. All sampling and testing shall be conducted by persons licensed by the Virginia Department of Agriculture and Consumer Services. These tests shall be made by the Babcock Test, or other tests approved by that department, and shall, as directed by the approving authority, be subject to check tests made by a licensed tester.

C. Time of payment.

1. On or before the 23rd day of a delivery period, general distributors shall make a partial payment to producers or cooperative associations of producers for base deliveries received during the first 15 days of the delivery period. The partial payment shall be not less than an amount determined by multiplying the previous month's Class II skim, butterfat or net price for 3.5% milk by the hundredweight of base deliveries for the first 15 days of the delivery period; provided full and final payment for the preceding delivery period was made in accordance with subdivision 2 of this subsection, otherwise the partial payment shall be not less than an amount determined by multiplying the current Class I skim, butterfat and net prices for 3.5% milk by the hundredweight of base deliveries for the first 15 days of the delivery period.

2. On or before the 16th day following the close of a delivery period, state regulated general distributors shall make full and final payment to producers or cooperative associations of producers for deliveries received during such delivery period pursuant to this chapter. Fully federally regulated general distributors shall make full and final payment to producers or cooperative associations of producers for deliveries received during such delivery period pursuant to the applicable provisions of the order in which they are pooled. Payment shall be made so that it is received by the dates applicable to state order and federal order plants.

3. Certified or registered mail may be required for all U.S. Postal Service deliveries of producer payments made by general distributors pursuant to subdivisions 1 and 2 of this subsection when directed in writing by the agency.

4. The approving authority may, after a hearing, require individual general distributors to make settlement with producers or cooperative associations of producers for deliveries at intervals other than provided in subdivisions 1 and 2 of this subsection.

5. All licensed producers or association of producers supplying base deliveries to processing general distributors located in Norfolk, Portsmouth, Hampton, Newport News or Chesapeake shall be allocated $0.10 per hundredweight from the total monthly Eastern Market Class I producer payments. This allocation shall be made prorata in accordance with the monthly base deliveries to the processing general distributors located in the aforementioned cities.

6. Before the 15th day of each month, the agency shall determine the required monthly equalization payments and give written notice to all affected parties of the amounts payable. The monthly equalization payments shall be made to the Milk Commission Equalization Fund no later than the 25th day of the month subsequent to the end of each delivery period. On or before the last day of each month, the agency shall disburse all funds (less a balance necessary to pay all bank charges) paid in during the current month in accordance with subdivision 5 of this subsection.

D. Redistribution of producer losses. When the approving authority is satisfied that when one or more licensed distributors is unable, due to bankruptcy or receivership, to fulfill the financial obligation to producers and/or cooperative associations of producers for base deliveries, the approving authority may authorize the establishment of a temporary producer redistribution fund to reallocate a distributor's deficient financial obligation.

1. When it is determined that an obligation for base milk deliveries cannot be satisfied, the distributor(s), producer(s) or cooperative associations of producers involved shall notify the approving authority within five working days of a voluntary filing or adjudication of bankruptcy or receivership, or within five working days of August 1, 1991, for licensed distributors currently in bankruptcy or receivership. This notification shall be in writing accompanied by copies of pertinent court documents.

2. The producer funded redistribution of losses of an unfulfilled obligation of base deliveries shall be limited to an amount not to exceed the unsecured value of base deliveries calculated in accordance with this chapter.

3. A producer funded redistribution rate shall be established which will be the lesser of the actual dollar loss under subdivision 2 of this subsection or the dollars generated by a rate not in excess of 0.10/cwt., levied on producer's and/or cooperative associations of producers' monthly Class I allocated base deliveries for a period not to exceed 12 months for each bankruptcy. Each distributor shall remit to the agency no later than the 15th of each month the amount collected in accordance with this subdivision applicable to the prior month's delivery period at the rate established by the approving authority.

4. The agency shall disburse all redistribution funds, net of applicable bank charges, collected each month for the redistribution fund by the last day of the month. Funds will be disbursed prorata in relationship to the loss incurred by producers and/or cooperative associations of producers, less applicable bank charges.

5. Producers or cooperative associations of producers shall assign to the agency that portion of their loss claim which pertains to the value of redistributed funds paid on Virginia base deliveries by the agency in order to participate in the producer redistribution fund.

6. Any overpayment or recovery of loss claims assigned to the agency by producers or cooperative associations of producers to the producer redistribution fund shall be disbursed to producers or cooperative associations of producers on a prorata basis of payments made to the fund.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 16, Issue 9, eff. January 1, 2000; amended, Virginia Register Volume 17, Issue 14, eff. March 1, 2001; Volume 24, Issue 16, eff. April 14, 2008.

2VAC15-20-90. Records and reports.

A. Each distributor shall accurately prepare and maintain all records necessary to enable the agency or its representative to determine:

1. The amount, source, grade, butterfat test and price paid for all milk and cream received from all sources. These records must show daily transactions, summarized into monthly totals.

2. The use or disposition of all milk and cream received from all sources. These records must show retail, wholesale and other sales by units and the value received for each group of units shown as daily transactions, summarized into monthly totals.

3. The butterfat tests of each producer's milk made according to this chapter, the date such tests were made and the butterfat test of each commodity sold.

B. Not later than the seventh day of each month all licensees, except retail distributors, shall furnish the agency with information which specifies all receipts and utilization of milk, along with other information as may be required by the agency. This information may be filed with the agency in any of the following approved formats:

1. Agency forms;

2. Federal reports;

3. Licensee generated printouts or reports; or

4. An electronic format specified by the Virginia Department of Agriculture and Consumer Services (VDACS), including, but not limited to, electronic mail or by completing any forms provided online by VDACS.

Additionally, this information must be transmitted to the agency in an agency approved manner in order to meet established deadlines. This information must be compiled from records of a permanent nature and these records shall be subject to audit and inspection by any authorized representative of the approving authority. Not later than the 12th day of each month the agency shall inform each processing general distributor of the classified sales allocated to each producer or cooperative association for the previous month.

C. Each processing general distributor, producer general distributor and distributor shall document in detail each wholesale transaction either in written or electronic form. This documentation shall be maintained for at least six calendar months, or until audited, and be subject to inspection by any authorized representative of the agency.

D. All books and records, defined under Chapter 32 (§ 3.2-3200 et seq.) of Title 3.2 of the Code of Virginia, of all licensed distributors, except retail, producers and cooperative associations of producers shall be subject to audit by any authorized representative of the agency.

E. Information relating to individual distributors, producers or cooperative associations of producers shall be confidential.

F. Cooperative associations shall file with the agency a monthly statement. This statement, to be filed not later than the eighth of the subsequent month, shall list the name, base allotment, and production of each of the cooperative associations' baseholding producer members.

G. Cooperative associations shall file with the agency by the seventh of the month a statement which indicates total daily deliveries by day made to licensed processing general distributors for deliveries made in the preceding month.

H. Cooperative associations shall furnish the agency not later than the last day of each month a copy of all billings for milk deliveries to licensed processing general distributors made in the prior month.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 9, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997; Volume 25, Issue 10, eff. February 18, 2009; Volume 26, Issue 11, eff. February 9, 2010.

2VAC15-20-100. Rules of practice.

The following rules of practice shall be observed:

1. The sale of milk products shall be in containers of the size and butterfat content as specified by the regulations of the Virginia Department of Agriculture and Consumer Services.

2. Established wholesale and retail prices.

a. In the event the approving authority establishes wholesale and retail prices, except as provided in subdivision 2 b of this section:

(1) Retail prices shall apply to all sales other than wholesale or where milk is sold and consumed on the premises.

(2) Wholesale prices shall apply to sales of milk products by processing general distributors, producer general distributors or distributors resold for consumption, whether on or off the premises, and shall apply to sales made by all licensed distributors to hotels, restaurants, stores, licensed boarding houses, vending machine operators and other operations which have a sales tax exemption certificate as set forth in § 58.1-623 of the Code of Virginia.

b. Processing general distributors or distributors or producer general distributors may submit bids at other than established wholesale prices to any governing body of any municipality, county or state, or by the federal government, or by any agency operated by the above, or by colleges, universities and schools, either elementary or secondary whether or not they be public or private, provided:

(1) The sales are classified as Class I for the purpose of producer payments, except those sales that are made on federal reservations over which the state government has ceded jurisdiction; and

(2) The processing general distributor, producer general distributor, or distributor has been licensed by the approving authority to distribute milk products in the market concerned.

c. No processing general distributor, producer general distributor, distributor or retail distributor, his officers, agents or employees, shall engage in, permit or encourage any method or device in connection with the sale of milk which results in increasing or reducing the net price for the product above the maximum price or below the minimum price when established by the approving authority.

3. Processing general distributors, producer general distributors, or distributors shall not directly or indirectly:

a. Pay for advertising of milk in any place of business of a milk customer or prospective milk customer without first having obtained the written approval of the agency.

b. Pay for advertising of a milk customer or prospective milk customer. However, a distributor may pay at the published or prorata rate, whichever is less, for the actual space or service used for the advertising of his milk.

c. Provide a milk customer or prospective milk customer with any article for handling or serving milk except on a bona fide sale. In order to be considered bona fide such sale must meet the following minimum requirements:

(1) The sale price shall be not less than the cost (including freight and installation costs) or not less than the book value based on 10% per year depreciation of the cost to the distributor (plus installation costs).

(2) In the event that the article has been fully depreciated on a ten-year basis the price to the milk customer or prospective milk customer shall be not less than original cost or 10% of its current replacement value whichever is the greater.

(3) In order to be considered as a cash sale, payment in full must be made by the milk customer or prospective milk customer within 31 days after installation of the article.

(4) If sale is made on other than a cash basis, as defined in subdivision 3 c (3) of this section, the following requirements shall apply:

(a) A down payment of not less than 10% of the total cost of the article must be made within 31 days after installation.

(b) Interest of not less than the current prime rate at the time of sale must be charged on the unpaid balance due the distributor for all sales.

(c) The unpaid balance must be paid in full within a period not to exceed three years, by monthly payments at least equal to 1/36 of the initial unpaid balance. Said payments may be anticipated in part or in whole.

(d) Payment of the balance due must be secured in such a manner that the article may be repossessed for nonpayment.

(e) In the event any payment becomes overdue by 60 days the article must be repossessed immediately.

However, the approving authority may grant an exemption for charitable purposes when requested in writing. Also, transactions involving milk handling equipment to any governing body of any municipality, county or state; to the federal government or any agency operated by the preceding; or to colleges, universities or schools (elementary or secondary, public or private) are exempted from these requirements.

d. Combine the pricing or sale of milk with any other commodity, product, or service regardless of the cost, if any, to the distributor of such commodity, product, or service.

e. Engage in any practice or practices which may tend substantially to lessen competition in, or substantially to increase the cost of, distribution of milk.

f. Advertise, transfer, sell or offer to sell at wholesale or retail any packaged Class I product purchased for resale at less than cost. Cost shall be the net purchase invoice or transfer price, including all applicable discounts or rebates, plus 6.0% and presumed delivery costs defined in subdivision 3 g 2 of this section, unless a lower amount can be justified to the approving authority's satisfaction by the licensee. When making justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

g. Advertise, transfer, sell or offer to sell at wholesale any packaged Class I product processed and packaged by their own facilities, leased, or subsidiary facilities or by contractual agreement at less than cost.

(1) Cost for Class I items sold at plant dock shall be presumed to be the total of the following cost factors:

(a) The net cost of the fluid milk computed at the established Class I rate (adjusted for butterfat content).

(b) A shrinkage factor of 2.0% of the volume of each container computed at the established Class II rate for the plant average butterfat test.

(c) The net cost of any fortification or added ingredients.

(d) The net container cost.

(e) The net approving authority assessment cost to the licensee.

(f) The weighted average of all other platform costs as determined by the approving authority's current cost study of "Cost Created in Processing and Distributing Milk by Processing General Distributors in Virginia."

(2) The presumed cost for Class I items delivered to wholesale accounts shall be the product of the total platform cost as set forth in subdivision 3 g (1) of this section, multiplied by the following percentages:

More than 99 cases per delivery—Platform Cost x 1.0675 (6.75%)

From 14 to 99 cases per delivery—Platform Cost x 1.125 (12.5%)

Less than 14 cases per delivery—Platform Cost x 1.250 (25%)

Effective December 31, 1997, these percentages may be adjusted each year by the annual percentage of change in the weighted average case delivery cost as determined by utilizing the accounting principles set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc.

However, when two or more wholesale accounts purchase Class I items from a distributor under a contractual agreement which provides for consolidated billing and payment, the average case delivery for the entire group of accounts shown on the consolidated billing shall be used instead of delivery volume to each individual account. For the purpose of this subdivision, a case shall consist of unit fluid equivalent of four gallons.

(3) Instead of the cost determination as set forth in subdivisions (1) and (2) of this subdivision, a licensee may substitute his costs provided they can be justified to the agency's satisfaction. When making such a justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

h. Purchase milk or accept transfer of fluid milk products except from processing general distributors, distributors, or producer general distributors licensed in the market.

4. Processing general distributor, producer general distributor, and distributor sales to a governing body of any municipality, county or state, or the federal government, or colleges, universities and schools, both public and private, are specifically exempt from the below cost and other provisions of this section, provided the sales are classified as Class I for the purpose of producer payments, except those sales made on federal reservations and the processing general distributor, producer general distributor or distributor has been licensed by the approving authority to distribute milk products in the market concerned.

5. Other provisions of this chapter notwithstanding, no distributor shall be prohibited from meeting a lawful competitive price below his cost as determined by the provisions of this chapter provided a written statement is filed with the commission giving the following information prior to meeting that price:

a. The name and address of the distributor licensee offering the competitive price he anticipates meeting;

b. The exact price necessary to meet competition;

c. The effective date of the competitive price he anticipates meeting;

d. The effective date of his price necessary to meet the competitor's price; and

e. A statement that he will not at any time sell or offer to sell at a price that is less than the competitor's price.

6. Retail distributors.

a. A retail distributor shall not purchase milk or accept transfer of fluid milk products except from processing general distributors, distributors or producer general distributors licensed in the market.

b. A retail distributor shall not combine the pricing or sale of milk with any other commodity, product, or service regardless of the cost to the distributor of the commodity, product, or service for the purpose of circumventing the below cost provisions of this chapter.

c. A retail distributor shall not advertise, sell or offer to sell, at retail, any packaged Class I product at less than cost. Cost shall be presumed to be the net purchase invoice or transfer price including all applicable discounts on rebates, plus 6.0%, unless a lower amount can be justified to the agency's satisfaction by the licensee. When making a justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, dated March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

d. Other provisions of this chapter notwithstanding, no distributor shall be prohibited from meeting a lawful competitive price for like products below his cost as determined by the provisions of this chapter provided a written statement is filed with the commission giving the following information prior to meeting that price:

(1) The name and address of the distributor licensee offering the competitive price he anticipates meeting;

(2) The exact price necessary to meet competition;

(3) The effective date of the competitive price he anticipates meeting;

(4) The effective date of his price necessary to meet the competitor's price; and

(5) A statement that he will not at any time sell or offer to sell at a price that is less than the competitor's price.

e. A retail distributor may price code dated milk at less than cost on date of code or after to dispose of inventories of milk.

7. Sales promotions, advertisements, and coupon offers involving fluid milk products are allowable provided the following conditions are met:

a. Sales promotions, advertisements, or coupon offers are submitted to the agency in writing for the administrator's approval;

b. The effect of the promotion, advertisement or coupon is not to circumvent the below cost provisions of this chapter;

c. The promotion, advertisement, or coupon offer does not involve any distributor paying for the cost of any part of the promotion, advertisement, or coupon which results in circumvention of below cost prohibition; and

d. The promotion, advertisement, or coupon does not involve any practice or practices which may substantially lessen competition in or substantially increase the cost of milk.

Upon written request, a distributor may donate fluid milk products, if approved by the approving authority or designee, provided that the donated milk is classified as Class I for producer payment purposes.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 10, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 9, Issue 6, eff. January 1, 1993; Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-110. Assessments.

A. All expenses necessary for the operation of the agency shall be met by assessments as provided for in Chapter 32 (§ 3.2-3200 et seq.) of Title 3.2 of the Code of Virginia. Assessments shall be collected by the agency and deposited immediately in a designated state depository to the Treasurer of Virginia.

B. Assessments shall be made in the following manner:

1. Assessments shall be collected from all licensed general processing distributors, producer general distributors, and distributors in an amount as directed by the approving authority. Assessments shall not exceed five cents per hundredweight on all milk or cream (converted to terms of milk) handled by distributors and/or sold by producers and cooperative associations of producers. These assessments shall be the same per hundredweight on producers and distributors.

2. Within 15 days after the close of a delivery period, all licensed general processing distributors, producer general distributors, and distributors shall remit to the agency an amount equal to the total assessments levied for the delivery period, including both the assessment levied on distributors and producers and/or cooperative associations of producers. The amount of production assessment paid to the credit of producers or cooperative associations of producers by a distributor shall be credited against the amount payable to producers and/or cooperative associations of producers by said distributor.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 11, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997; Volume 25, Issue 10, eff. February 18, 2009.

2VAC15-20-120. Hearing notice.

A. Notice of proceedings under § 3.2-3208 of the Code of Virginia shall be provided as set out in this subsection. The approving authority may publish in a newspaper of general circulation a notice which shall inform the public of the proceeding and the time, date, and place of the public hearing. The administrator is directed to give other notice as he deems appropriate, including notice to persons on the distribution list who would be affected by the approving authority's order.

B. If the approving authority establishes minimum retail prices for milk without a public hearing, it shall hold a public hearing on the emergency order not less than 15 nor more than 60 days after its issuance. Such notice will take the form as provided in subsection A of this section.

C. Notice of proceedings under § 3.2-3206 of the Code of Virginia shall be provided as set out in this subsection. The approving authority shall issue a notice of hearing in accordance with the provisions of 2VAC15-12-90.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 12, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997; Volume 25, Issue 10, eff. February 18, 2009.

2VAC15-20-125. Hearing procedures.

A. The official transcript of the public hearing conducted by the approving authority shall be the transcript taken at the public hearing by a court reporter employed by the agency. The official transcript of any public hearing will be available from the court reporter to the public at cost.

B. Except as otherwise amended by motion, public hearings shall be as follows:

1. The chairman of the commission shall call the public hearing to order and shall give or cause to be given (i) the general nature of the hearing and the statutory authority for it; (ii) introduction into the record of a copy of the notice stating the time, place, date or dates such notice was given, and the method whereby it was served; (iii) the presentation of the evidence.

2. Unless otherwise directed by the approving authority, or unless provided for under special rules governing the particular case, evidence and testimony will ordinarily proceed in the following order, followed by such rebuttal evidence as may be necessary and proper: (i) the commission's staff, (ii) producers or their representatives, (iii) distributors or their representatives, (iv) consumers.

C. An employee of the agency shall be designated as the hearing clerk for the purpose of administering oaths and affirmations, accepting and controlling evidence and briefs, and calling witnesses. Employees serving as hearing clerks will also be responsible for the preparation of a report of the proceedings with recommendations and proposed findings and conclusions. This report shall be made available to participants and other interested parties when requested in writing. It shall serve as the basis for exceptions, briefs and arguments to the agency.

D. Exhibits offered in evidence during the public hearing will be given an identifying number. Exhibits will be numbered consecutively beginning with the number one and will bear an identifying suffix giving the name and organization of the person introducing it.

E. Participants and other interested parties shall be permitted to become a party to the proceedings and to conduct cross examination of witnesses upon written request. Written requests shall be received by the agency not less than five working days prior to the date of the hearing. The agency reserves the right to limit the number of individuals from the same organization that will be permitted to cross examine witnesses.

F. All witnesses shall testify under oath and following their testimony shall be examined by the approving authority and its attorney.

G. Briefs may be required or allowed at the discretion of the approving authority. The time for filing briefs shall be fixed at the time they are required or authorized. For the purpose of expediting the proceeding, parties may be required to file their respective briefs on the same day. Unless otherwise ordered by the approving authority, reply briefs will not be permitted or received. The time for filing reply briefs will be fixed by the approving authority.

H. The approving authority shall make its decision only on evidence introduced at the public hearing. The approving authority shall adopt, along with its order, its finding of facts and conclusions of law.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

2VAC15-20-130. Repeal of prior rules and regulations.

Upon the effective date of this chapter, any previous rules, regulations, and orders adopted by the approving authority which conflict with this chapter are repealed unless otherwise indicated.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.

Historical Notes

Derived from VR475-02-02 § 13, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; Aug 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Virginia Register Volume 13, Issue 26, eff. October 15, 1997.

Forms (2VAC15-20)

Application for Distributors' License

Documents Incorporated by Reference (2VAC15-20)

Fluid Milk Products Cost Manual, Case & Company, Inc., March 1, 1979.

Costs Created in Processing and Distributing Milk Processed by General Distributors in Virginia, State Milk Commission, updated regularly.