Agriculture

Foreign companies have been fined thousands of dollars for not reporting land purchases

The Department of Agriculture’s tracking of foreign land ownership relies heavily on investors voluntarily reporting acquisitions, and lawsuits have fallen sharply even as the number of transactions has risen over the past decade, according to Agro-Pulse analysis of USDA data.

The USDA has issued just eight fines since 2012 totaling $245,818, and only three of those have been imposed since 2015, including $135,000 in fines levied against a pair of Chinese companies last year for investment in Texas. Meanwhile, the number of foreign acquisitions reported by the USDA rose from just 911 parcels involving 186 investors in 2012 to 6,363 parcels purchased by a total of 323 investors in 2021.

By comparison, the USDA reported $870,000 in fines against 331 investors from 2000 to 2011. according to data obtained under the Freedom of Information Act.

It is not clear from the data whether the decline in enforcement cases is due to greater investor compliance. A USDA official, who spoke on condition of anonymity, said it could be a combination of that and the agency’s changing priorities. The official said Farm Service Agency officials are focusing on informing investors about reporting requirements and collecting the information provided, rather than imposing fines that could discourage applications.

“Our goal is not to punish them, but to get information,” the official said. “We don’t have investigative bodies. We’re not going to go after people who may or may not report.”

Since the enactment of the Foreign Agricultural Investment Disclosure Act in 1978, 27.6 million acres of foreign-owned land have been reported to the FSA. Most companies that break the law have turned themselves in; The USDA has a staff of just three to oversee compliance with the reporting law, and officials acknowledge that some transactions likely go unreported.

“We can’t just go out and stop at every farm and ask about ownership,” said Farm Service Agency Administrator Zach Duchesneau Agro-Pulse.

Brazos Highland Properties, a wind energy company linked to Chinese Communist Party member Sun Guangxin, was fined $120,000 in 2021 after the company failed to register 102,000 acres of land in Texas with the USDA within 90 days of the deal . This is the largest fine paid to a violator to date.

Harvest Texas LLC, another Chinese company affiliated with Guangxin, was also fined US$15,019 last year for failing to report the purchase of 29,704 acres of land in Texas.

Denmark-based RMK Select Timberland Investments was fined the second largest, paying US$111,000 in 2011. In 2013, Walton Group, a real estate investment company with clients from different countries, was fined $74,000. .

The law requires foreign investors to file a form with the Farm Service Agency in the county where the land is purchased, detailing the number of hectares purchased, the country of origin of the buyers, the purchase price and the intended use of the land.

“If you buy, sell or change your alien status with respect to that piece of land, each of those changes requires a filing,” said Marissa Bocci, a real estate attorney who specializes in farmland and agribusiness transactions.

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Foreign investors who fail to report land purchases within 90 days may incur a late fee of 0.1% of the land value for each week that the purchases remain unregistered, with a penalty not exceeding 25% of the land value. Investors who provide false or misleading information can be fined up to 25% of the value of the land.

AFIDA was deliberately designed to make it mandatory for investors to report their land holdings to the USDA, rather than forcing the agency to track them. Sen. Chuck Grassley, an Iowa Republican who co-sponsored the legislation, said Congress did not want to overburden FSA offices.

“That’s how we had to write it,” he said Agro-Pulse. “You have to remember that there are penalties for not reporting, and I guess in America we assume that the laws will be enforced. If they are not followed, there will be consequences.”

Rumors of massive foreign land purchases in the 1970s led to debate in Congress about whether foreign investors should be prohibited from buying agricultural land. Congress asked the Government Accountability Office and federal agencies to compile figures on foreign land ownership, but all concluded that the necessary data simply did not exist.

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Congress commissioned a study in 1978 to determine the feasibility of a system to track foreign ownership of farmland. The report, according to congressional records, analyzed tracking methods used in other countries, how public property and tax records could be used and what other public and private sources of information existed.

The study was scheduled to be completed by the fall of 1979. But lawmakers introduced AFIDA before it was completed, even though USDA officials advised them to wait.

“I haven’t seen a single bill in this committee that would solve the problem you’re talking about,” USDA economist Howard Hurt told lawmakers at a 1978 hearing. “If it’s true that we don’t know exactly how to identify foreign ownership – what it is – then there needs to be research into that. Just getting registration information won’t solve the problem.”

This was told by a representative of the USDA, who wished to remain anonymous Agro-Pulse that the FSA occasionally becomes aware of overseas land purchases that have not been reported to the agency and will send a letter to the purchasers notifying them of the possible breach.

The official also said that it is more difficult for FSA district offices to detect potential violations than it was in previous years due to the change in the nature of transactions and their complexity. AFIDA requires reporting before the third level of ownership, so any company that owns a company that owns agricultural land is responsible for reporting.

The USDA has the authority to reduce the fines it assesses — and often does — to encourage investors to come forward if they miss an application, the official said. The agency may reduce the payment depending on the duration of the violation, the method of discovery, mitigating circumstances, and the nature of the misrepresented or missing information.

A USDA spokesman said most of the fines imposed by the agencies were “modest” because organizations are usually quick to come forward with information when they learn they are breaking the law. The widespread use of large fines could discourage investors from filing late, they said.

“We want to avoid this outcome,” the official said. “It’s a balancing act, and the ultimate goal is to enforce the law as much as possible.”

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Kenneth Ackerman, a lawyer and former USDA official who represented Brazos Highland Properties in discussions with the agency, said the Texas law firms the Chinese company worked with did not file AFIDA forms when they prepared the rest of the documents needed for the transactions. .

A wind company’s purchase of Val Verde County farmland sparked controversy in 2017 and 2018 because of its proximity to a military base. The Committee on Foreign Investment in the United States, which reviews certain land transactions for potential national security risks, eventually cleared the deal.

Brazos later learned it had not submitted the correct documents to the FSA and submitted the forms after meeting with the agency to discuss the situation, Ackerman said.

After weighing the circumstances, the agency reduced the original $21 million fine to $120,000. the letter he sent to Brazas.

“We felt it was a fair penalty in recognition of the fact that we didn’t submit the forms on time,” Ackerman said.

Lawmakers on both sides of the aisle proposed changes to AFIDA after raising concerns about the law’s effectiveness and the accuracy of current numbers.

Sens. Tom Cotton, R-Ark., and Tommy Tuberville, RA., have proposed requiring fines to be at least 10% of the fair market value of the land, while Rep. Mark Pocan, R-Wis. offered abolition of the 25% limit on fines.

“We just want to make sure we’re collecting that information on a regular basis so we have an idea of ​​whether there’s a real problem or not,” Pocan said. Agro-Pulse. “We want to make sure USDA is getting and analyzing the information it needs. If they need resources, we will be happy to help them.”

Other lawmakers are looking to increase USDA transparency and enforcement. Grassley and Sen. Tammy Baldwin, R-Wis. introduced the bill in July requiring the USDA to publish every AFIDA application in a searchable online database. Twenty-one members of the Republican House, too wrote Agriculture Secretary Tom Vilsack with questions about the agency’s methods for ensuring AFIDA compliance.

The agency is looking internally to improve its data collection efforts. A USDA source said the department is evaluating its penalty structure for late and erroneous filings, increasing outreach to stakeholders involved in foreign transactions, and modernizing the way it collects and disseminates key data.

“We are doing everything that is asked of us in terms of documenting foreign ownership of agricultural land,” Duchesneau said. “If we’re asked to do more, we’ll try to find a way to do it.”

For more news, go to www.Agri-Pulse.com.

https://www.agri-pulse.com/articles/18256-while-foreign-purchases-of-us-land-surge-usdas-reporting-penalties-plunge Foreign companies have been fined thousands of dollars for not reporting land purchases

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