A biotech developer can’t use a century-old warehouse law to force a grain elevator company to accept its genetically engineered corn, according to a federal appeals court.
The ruling will likely preclude other biotech seed companies from using a similar litigation tactic with elevators that reject crops due to their transgenic traits, experts say.
The controversy dates back to 2011, when the Bunge elevator company refused to accept the Agrisure Viptera corn variety, which is produced by Syngenta Seeds.
Bunge told growers that it couldn’t accept the Viptera variety because it hadn’t cleared regulatory hurdles in all major export destinations. The trait hadn’t been approved by officials in China.
In response, Syngenta filed a lawsuit accusing Bunge of violating the U.S. Warehouse Act of 1916, which requires elevators to treat depositors fairly.
Farmers who grew Viptera corn had to ship their crops to other elevators and find other sources of corn to fulfill their contracts with Bunge, which hurt Syngenta’s reputation and market share, the biotech company claimed.
The 8th U.S. Circuit Court of Appeals has thrown out Syngenta’s lawsuit, ruling that the company lacks a “cause of action” to bring a case against Bunge in court.
Farmers directly affected by Bunge’s refusal may still sue the elevator company, but the 8th Circuit’s ruling would prevent similar lawsuits by Monsanto, Dow, DuPont or another biotech seed firm, said Drew Kershen, an agricultural biotechnology law professor at the University of Oklahoma.
“This seems to say to them, you don’t have a private cause of action,” he said. “They would be in the same position as Syngenta.”
Even if a farmer does sue Bunge over its rejection of Viptera corn, the lawsuit’s chances of success would be murky, Kershen said.
It’s unclear whether an elevator’s obligation to be “fair and reasonable” would prevent it from rejecting certain types of grain, he said.
“There’s no case law, there’s no USDA interpretation, there’s no clarity on what those terms mean,” Kershen said. “There has been nothing to discuss this in all the decades of this law.”
Critics of biotechnology see the dispute between Syngenta and Bunge as a cautionary tale about the impact of genetically engineered crops on export markets.
“It’s another example of the economic harm to farmers that can come from transgenic contamination,” said George Kimbrell, an attorney with the Center for Food Safety, a non-profit that has litigated over biotech crops.
The 8th Circuit’s ruling supports the notion that businesses that don’t want to buy biotech crops “can’t be forced to take them,” he said.
Proponents of biotechnology say the case points to the need for “equalization” of biotech crop standards across importing countries.
In an ideal world, a single “harmonized” method of approval would allow biotech crops to be shipped to all importing countries, rather than being approved by each individually, said Mary Boote, executive director of the Truth about Trade and Technology, non-profit that supports biotechnology.
“That’s a big goal but an important one,” she said.
Since the dispute between Bunge and Syngenta began in 2011, China has escalated its rejection of Viptera corn by also turning away dried distillers grains — an ethanol byproduct — that contain the trait, Boote said.
China’s actions aren’t based on real concerns about the crop, but are intended to serve as a trade barrier, she said. “It has become a protectionist move.”
The same trait is likely present in corn that China buys from Argentina and Brazil, so China is probably using the issue as a tool in broader trade maneuvers, Boote said.
China will probably continue to reject Viptera corn until the country experiences a corn shortage, she said.