Oddly, the lawsuit that could have an adverse impact on the $60-million-plus checkoff program that funds Cotton Incorporated wasn't much the topic of conversation at the annual meeting of the Cotton Board, which has oversight for the organization's research and promotion programs.
The legal challenge to the Cotton Research and Promotion Act was filed by a group of textile importers who object to their being assessed to help support the program. There has been a minor level of dissent among the importers since they were brought into the checkoff program several years ago, even though most will agree that the program has been of significant benefit to them.
“Right now, we're just standing pat until there is a resolution of the beef (checkoff) case before the Supreme Court,” Bill Crawford, president and chief executive officer of the Cotton Board, said at the group's annual meeting at Seattle — attended by a number of importers.
Judge grants stay
In the latest development a week or so ago, a law judge in the Court of International Trade granted a stay for the cotton suit, pending the outcome of the beef case.”
Industry observers expect the Supreme Court may get around to oral arguments on the beef issue in November, with a decision perhaps late in the first quarter or early in the second quarter of 2005.
If the ruling goes against beef, it's difficult to predict how things will play out in terms of the cotton case, says Crawford. “It will depend on how broad or how narrow the ruling is. In 200l, when the court ruled on the mushroom case, it was a narrow decision that was applicable strictly to that commodity.”
The complaint by the importers contends that the cotton assessment is unconstitutional based on the First Amendment. Of the 6,000 to 7,000 importers currently paying the assessment, less than 120 are signatories to the lawsuit. They have asked the International Court of Trade for class action status, but that hasn't yet been ruled on. If granted, then all importers being assessed would be made parties in the suit.
Levies on imports now generate about one-third of the total revenue stream for the Cotton Incorporated program, and loss of those funds would be a significant blow to the organization's research and promotion programs.
Government observers, however, are of the opinion that if there is an adverse ruling in the beef case that is broad enough to affect cotton, the USDA would then attempt an administrative fix for whatever portions of the program considered unconstitutional.
The cotton assessment program has enjoyed long term support by the majority of the nation's producers, who initially were the only ones paying the checkoff. Cotton Incorporated's worldwide efforts in promoting cotton have been targeted and hard-hitting, and the Cotton Seal is now one of the most recognized logos on the planet.
“Our program is structured differently than many of the other commodity assessment programs,” Crawford notes, “in that from the beginning there was a clear separation of cotton's advocacy group (the National Cotton Council) and the checkoff program. This has helped to avoid a lot of disagreements that have surfaced in other commodity assessment programs.”
It's ironic, industry observers say, that the board and the importers have seen eye to eye on so many issues over the years, and now the importers are filing suit — that for whatever reason, they don't feel the program has value to them.
Crawford says, “I personally think the relationship between the Cotton Board and the importers is as good as it has ever been. Support by growers continues to be very, very strong, and I believe that is the case with a large portion of the importer community. The Cotton Incorporated program is a major benefit to everyone and has helped maintain cotton's share of the market in the face of increasing world competition by other cotton countries and man-made fibers.
“There are all kinds of macroeconomic data to show the program has had a significant beneficial impact on U.S. cotton.
“We're making a lot of progress in many areas of vital importance to cotton. The Cotton Board seeks to provide positive, constructive input to Cotton Incorporated without day-to-day micro-management.”
One factor that has been a benefit in a significant benefit to the cotton sector as a whole, Crawford says, is that growers in different regions don't look upon themselves as competing against each other, western vs. southeast, or Delta vs. southwest. “There's a what's good for one is good for all attitude about the issues and problems we face. The various production regions have a commonality of interests.”
And, he says, there is a unity of purpose in self-help through producer organizations such as the National Cotton Council, the Cotton Board, Cotton Council International, and the consistently high quality of the leadership in all cotton sectors — “from dirt to shirt, or even further, through the sale of the shirt. Other commodity groups don't have that breadth of activity, support, and leadership.”
One bright spot in the legal wrangle: The cotton program won't have to spend large chunks of money defending the importer lawsuit, since the USDA and the Justice Department are handling the case.