(1) As an aid to the efficient collection of license fees and assessments, each distributor who purchases milk from producers shall deduct from payments due such producers any license fees and administrative assessments due the department from such producers under 81-23-202 and 81-23-105, MCA. The distributor shall transmit such fees and assessments to the department together with a statement of individual producer assessment payments. Assessments under 81-23-202, MCA, shall be reported and paid at least quarterly, as provided in that section. Assessments under 81-23-105, MCA, and ARM 32.23.302 shall be separately reported and paid monthly.

(2) Deductions of any kind (other than assessments that are required under 81-23-105 and 81-23-202, MCA, and license fees) from payments due producers may be made ONLY UPON WRITTEN AUTHORIZATION from producers, or, in the case of cooperatives, upon formal resolution of the directors at a regular business meeting. A copy of such authorization shall be retained by the distributor as part of its permanent records for its own protection.

(3) When producer payments are based upon butterfat tests from composite samples, a portion of each composite sample must be retained until the succeeding composite sample is tested.

(4) Each distributor must maintain a record of butterfat tests of each producer's milk or cream covering each pay period and provide each producer with each butterfat test result made for that producer as provided in (7) of this rule. Such record shall be kept on file for two years and be made available to any authorized agent of the department upon request.

(5) On or before the tenth day of each month, the bureau will post for public inspection in the main office of the department an original notice of the class I, II and III prices to be paid producers for grade A milk by distributors during the next calendar month. In addition thereto and on the same day, the bureau will cause a correct copy of the posted notice to be mailed to each distributor, producer-distributor, and producer licensed under the Act. The notices must contain not only statements of the correct prices to be paid, but statements of the applicable Chicago area average prices relied upon, and the mathematical computations by which Montana prices were arrived at.

(6) For the purpose of determining the audit value of producer milk delivered to a plant under 81-23-302, MCA, all butterfat and skim milk received from producers shall be considered as utilized by the plant in either class I, II or III as indicated by plant processing and sales records. Skim milk dumped or allocated to allowable shrinkage shall be considered as utilized in class III for pricing purposes.

(7) Distributors purchasing milk or cream from producers shall render to producers not later than the 15th day of each month, statements showing each of the following items:

(a) name and address of distributor issuing statement,

(b) date of statement,

(c) period for which statement is rendered,

(d) name of producer for whom the statement is intended,

(e) producer butterfat tests for the first half of the month or other test period,

(f) producer butterfat tests for the last half of the month or other test period,

(g) the weighted average butterfat test of the producer for the month for which the statement is rendered,

(h) percentage of milk or skim milk and fat utilized in each classification, or, in the alternative, pounds of milk or skim milk and fat utilized in each classification,

(i) rate paid for milk at test for each classification as established by applicable rule,

(j) total pounds of milk purchased from producer,

(k) amounts paid as premiums, bonuses, etc.,

(l) gross amounts paid after addition of premiums etc.,

(m) itemization of advance payments and authorized deductions,

(n) total deductions, and

(o) net amount due and paid.

(8) On or before the eighth business day after the end of each month, in detail and on forms supplied by the department, each distributor must submit to the department a report of the information required by ARM 32.23.512, and a report of:

(a) out-of-state sales (packaged and bulk) ; and

(b) information of what producers, to the distributor's knowledge, have gone out of business during the preceding month.

(9) On or before the 15th day of each month, each distributor must submit to the department a duplicate or other correct copy of its producer payroll for the preceding month, indicating total producer deliveries and payment for the preceding month for each producer supplying the plant.

(10) Each distributor whose place of business is outside the state of Montana, but who comes under the jurisdiction of the Milk Control Act, and of this rule by virtue of his distributing milk within the state, either in bulk or packaged form, must file with the department on forms supplied by the department, on or before the 15th day of each month, a report of sales of such milk during the preceding month.

(a) Each import jobber who purchases milk from sources outside the state of Montana for resale in Montana must file with the department, on forms supplied by the department, on or before the 15th day of each month, a report of sales of such milk during the preceding month.

(b) Each producer-distributor shall file with the department, on forms supplied by the department, on or before the 15th day of each month, a report of his class I sales and disposition of production in excess of class I sales during the preceding month.

(11) The department shall cause periodic audits of the books and records of distributors to be made to verify the utilization of all milk reported pursuant to ARM 32.24.512, thereby establishing payment or nonpayment of producer prices fixed by rules of the board.

(a) Overpayments made by distributors not offset against underpayments or otherwise collected by the distributors within ninety days after final settlement of the audit of the period during which the overpayment was determined will not be credited to the distributor in any subsequent audits.

(b) Upon completion of each audit, the distributor will be furnished with an audit summary and commentary with respect to audit results and with indicated producer adjustments, if any, for each month audited. All underpayment settlements must be paid to producers on or before the next regular pay date and proof of such settlement payments must be filed with the department by the distributor forthwith.

(c) At any time a distributor is unwilling or unable to reconcile the audit results with rules of the board and/or department it may request a review of the audit by the bureau. The time limitation for final settlement payment to producers will be stayed until ten days after such review is completed and the distributor has received notice of the bureau's decision.

(d) Within ten days after the distributor receives notice of the bureau's decision it may file written application for appearance before the department at its offices in Helena, Montana to review the decision of the bureau. The time limitation on final settlement payment to producers will be further stayed until review by the department is completed. After such a review, the department will make official findings and conclusions and order, to be effective upon the issuance thereof.

(12) All milk and its component quantities of skim milk and butterfat sold by a producer or a producer marketing organization which is required to be reported pursuant to ARM 32.24.512 will be classified by the department pursuant to 81-23-101, MCA, for the purpose of establishing compliance with minimum producer prices fixed by applicable rule of the board, to-wit:

(a) Class I milk shall include, in addition to that specified in 81-23-101, MCA, shrinkage in excess of 2% of current producer receipts and plant overages.

(b) Class II milk will be classified as specified in 81-23-101, MCA.

(c) Class III milk shall include, in addition to that specified in 81-23-101; MCA, skim milk dumped, plant loss or shrinkage of 2% or less of current producer receipts and bulk inventories of fluid milk products.

(13) A distributor may reject milk provided by a producer because of inferior quality or noncompliance with the lawful rules of duly constituted health or sanitation agencies. In all cases the rejection of the milk must be supported by a statement to the producer setting forth the reason(s) for which the milk was rejected. A distributor shall mail a copy of the statement to the department.

(14) Except for persistent repetition of the cases set forth in (13) of this rule, no producer's contract or purchasing agreement, whether express or implied, may be terminated by a distributor except for cause after notice and hearing by the department in accordance with the rules and procedures prescribed by the Montana Administrative Procedure Act.

(15) No producer may terminate his contract or selling agreement with any distributor except by giving at least 30 days' WRITTEN notice to the distributor and to the department of his intention to terminate. However, nothing in this rule prevents a distributor and a producer from providing by WRITTEN contract or agreement for a shorter or longer period of notice. The producer must be paid in full by the 15th day of the month following the month of such termination.

(16) If any provision of this chapter, or the application of this chapter to any person or circumstance shall be held invalid, the remainder of this chapter, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.