[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3762 Introduced in House (IH)]
104th CONGRESS
2d Session
H. R. 3762
To assure payment to dairy and livestock producers for milk and
livestock delivered to milk processors, livestock dealers, or market
agencies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 9, 1996
Mr. Gunderson (for himself, Mr. Roberts, Mr. Johnson of South Dakota,
and Mr. Thornton) introduced the following bill; which was referred to
the Committee on Agriculture
_______________________________________________________________________
A BILL
To assure payment to dairy and livestock producers for milk and
livestock delivered to milk processors, livestock dealers, or market
agencies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Dairy and
Livestock Producer Protection Act of 1996''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--DAIRY INDUSTRY SECURITY RESERVE FUND
Sec. 101. Definitions.
Sec. 102. Establishment of Dairy Industry Security Reserve Fund.
Sec. 103. Establishment of Board of Trustees for Dairy Industry
Security Reserve Fund.
Sec. 104. Collection of assessments from milk handlers to fund Reserve
Fund.
Sec. 105. Submission and payment of claims of milk producers for
nonpayment for milk shipments.
Sec. 106. Preemption of State or local payment security programs.
TITLE II--STATUTORY TRUST FOR LIVESTOCK SELLERS
Sec. 201. Establishment of statutory trust for benefit of sellers of
livestock to dealers and market agencies.
TITLE I--DAIRY INDUSTRY SECURITY RESERVE FUND
SEC. 101. DEFINITIONS.
For purposes of this title:
(1) Board.--The term ``Board'' means the Board of Trustees
established under section 103 to administer the Dairy Industry
Security Reserve Fund.
(2) Milk.--The term ``milk'' means cow's milk produced in
the 48 contiguous States.
(3) Milk handler.--The term ``milk handler'' means a person
who receives or otherwise acquires milk in commerce before
processing or who first processes milk for the purpose of
marketing commercially milk or milk products.
(4) Milk producer.--The term ``milk producer'' means a
person who produces milk in the 48 contiguous States and
markets such milk for commercial use.
(5) Process.--The term ``process'' includes the
pasteurization, clarification, or separation of milk or the
addition of other ingredients or products to milk, except that
such term does not include simply the cooling of milk or the
commingling of milk with other milk.
(6) Reserve fund.--The term ``Reserve Fund'' means the
Dairy Industry Security Reserve Fund established under section
102.
(7) Secretary.--The term ``Secretary'' means the Secretary
of Agriculture.
SEC. 102. ESTABLISHMENT OF DAIRY INDUSTRY SECURITY RESERVE FUND.
(a) Establishment.--There is hereby established in the Department
of Agriculture a fund to be known as the ``Dairy Industry Security
Reserve Fund''. Monies in the Reserve Fund shall be available only for
the use of the Board.
(b) Contents of Reserve Fund.--The Reserve Fund shall consist of
the following:
(1) Amounts collected as assessments under section 104.
(2) Amounts collected by States before the date of the
enactment of this Act and paid to the Reserve Fund on behalf of
milk handlers subject to assessments.
(3) Amounts borrowed by the Board.
(4) Interest from investments made under subsection (d).
(c) Use of Reserve Fund.--The Board may use monies in the Reserve
Fund to pay--
(1) subject to section 103(f), the expenses incurred by the
Secretary or the Board in administering this title; and
(2) the claims of milk producers for milk shipped by the
producers for which payment is not made on account of the
bankruptcy under title 11, United States Code, of a milk
handler.
(d) Investment Authority.--The Board may invest monies in the
Reserve Fund in general obligations of the United States, in general
obligations of a State or political subdivision of a State, in any
interest bearing account or certificate of deposit of a bank that is a
member of the Federal Reserve System, or in obligations fully
guaranteed as to principle and interest by the United States. The
Secretary shall provide guidelines to the Board for the exercise of
this investment authority.
(e) Borrowing Authority.--The Board may borrow money for deposit
into the Reserve Fund if the Board determines that amounts in the
Reserve Fund are insufficient to satisfy approved claims.
SEC. 103. ESTABLISHMENT OF BOARD OF TRUSTEES FOR DAIRY INDUSTRY
SECURITY RESERVE FUND.
(a) Establishment.--There is hereby established a Board of Trustees
to administer the Dairy Industry Security Reserve Fund, set and collect
assessments under section 104 to provide funds for the Reserve Fund,
pay claims made against the Reserve Fund, and perform such other duties
as may be assigned to the Board by this title or the Secretary.
(b) Membership.--
(1) Appointment of members.--The Board shall consist of
nine members appointed by the Secretary as follows:
(A) One member selected from among milk producers
whose farms are located in Region I.
(B) One member selected from among milk producers
whose farms are located in Region II.
(C) One member selected from among milk producers
whose farms are located in Region III.
(D) One member selected from among the officers or
employees of milk handlers that are subject to the
assessment under section 104 and the principal place of
business of which is Region I.
(E) One member selected from among the officers or
employees of milk handlers that are subject to the
assessment under section 104 and the principal place of
business of which is Region II.
(F) One member selected from among the officers or
employees of milk handlers that are subject to the
assessment under section 104 and the principal place of
business of which is Region III.
(G) Three members selected from among persons who
are experts in financial investment or the staffing or
administration of relevant Federal programs, as
designated by the Secretary before the first
solicitation of nominees under subsection (c).
(2) Regional distribution.--For purposes of making regional
appointments of members of the Board under paragraph (1), the
48 contiguous States shall be grouped into three regions as
follows:
(A) Region I: Alabama, Arkansas, Connecticut,
Delaware, Florida, Georgia, Indiana, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Mississippi,
New Hampshire, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas, Vermont, Virginia, and West Virginia.
(B) Region II: Illinois, Iowa, Michigan, Minnesota,
Missouri, North Dakota, South Dakota, and Wisconsin.
(C) Region III: Arizona, California, Colorado,
Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico,
Oklahoma, Oregon, Utah, Washington, and Wyoming.
(3) Terms of members; vacancies.--Each member of the Board
shall serve for a three-year term, except that the Secretary
may stagger the terms of the initial members of the Board. A
vacancy on the Board shall be filled in the manner in which the
original appointment is required to be made.
(4) Compensation.--Members of the Board shall serve without
pay, but shall receive a per diem for each day during which
they are engaged in the actual performance of services on
behalf of the Board and shall be reimbursed for expenses
incurred in their service on the Board, including reasonable
travel costs and out-of-pocket expenses when required to be
away from their home or place of business in the service of the
Board.
(5) Removal for cause.--The Secretary may remove any member
of the Board for good cause shown.
(c) Nomination Process.--
(1) Appointment from nominees.--The Secretary shall appoint
the members specified under subsection (b)(1) from nominees
submitted pursuant to paragraph (2).
(2) Solicitation of nominees.--The Secretary shall begin
the process of filling a particular position on the Board by
soliciting the names of persons who are qualified to serve as a
member of the Board in that position. The Secretary shall
accept recommendations from persons who are qualified to serve
as a member of the Board in that position or from organizations
composed of such persons. The Secretary shall be the final
judge of the qualifications of persons to submit
recommendations or to serve on the Board.
(3) Lack of nominees.--If nominees are not submitted
pursuant to paragraph (2) for a particular position on the
Board, the Secretary may make the appointment in such other
manner as the Secretary may prescribe.
(d) Board Procedures.--
(1) Meetings of the board.--Within two months after the
Secretary has appointed the initial Board, the Board shall
convene for its initial meeting and elect officers and adopt
written bylaws and rules of procedure to govern its meetings.
Following the initial meeting, the Board shall meet at the call
of the chairperson or as requested by the Secretary, but at
least once every six months.
(2) Quorum.--A quorum of the Board shall be five members.
(3) Notice to secretary; ex officio representation.--The
Board shall notify the Secretary in advance of each meeting of
the Board. The Secretary, or a representative of the Secretary,
may attend each meeting as a nonvoting ex officio member of the
Board.
(4) Chairperson.--The members of the Board shall select one
of the members to serve as the chairperson of the Board. The
chairperson shall serve a one year term of office.
(e) Staff.--The Board may employ or contract with outside entities
for such persons as the Board considers to be necessary to assist the
Board to perform its duties under this title. The Board shall define
the duties of such persons in service to the Board and fix the
compensation of such persons. At the request of the Board, the
Secretary may assign, on a reimbursable basis, employees of the
Department of Agriculture to assist the Board.
(f) Administrative Expenses.--
(1) In general.--The Board may incur and pay for
administrative and other expenses related to the duties of the
Board under this title.
(2) Limitation.--Expenses incurred or paid by the Board
during a fiscal year may not exceed two percent of the total
amount in the Reserve Fund at the beginning of that fiscal
year. The Secretary may waive this limitation for fiscal years
before the Reserve Fund reaches the maximum capital
contribution level specified in section 104.
(3) Reimbursement of government costs.--As one of the
administrative expenses of the Board, the Board shall reimburse
the Secretary for all costs incurred by the Secretary--
(A) to assist the Board in administering the
Reserve Fund or in carrying out this title; and
(B) in performing oversight of Board activities.
(g) General Powers of the Board.--
(1) Bylaws and rules.--The Board may adopt bylaws and issue
rules and regulations governing the manner in which its
business may be conducted and the powers vested in it may be
exercised.
(2) Suits.--The Board may sue and be sued, complain and
defend, in any court of law or equity, State or Federal. All
suits of a civil nature at common law or in equity to which the
Board shall be a party shall be deemed to arise under the laws
of the United States, and the United States district courts
shall have original jurisdiction thereof, without regard to the
amount in controversy, and the Board, in any capacity, without
bond or security, may remove any such action, suit, or
proceeding from a State court to the United States district
court for the district or division embracing the place where
the same is pending by following any procedure for removal then
in effect.
(3) Intervention.--Upon timely application, the Board may
raise and may appear and be heard on any issue in a bankruptcy
case under title 11, United States Code, in which a milk
handler is the debtor.
(4) Contract authority.--The Board may enter into contracts
and agreements as necessary in the conduct of its activities
under this title.
(5) Miscellaneous authorities.--The Board may exercise such
other powers incidental to its performance of functions
required or authorized for it under this title.
(h) Reports.--The Board shall submit an annual report to the
Secretary and Congress describing the activities of the Board during
the preceding fiscal year, expenditures from the Reserve Fund during
that fiscal year, and the balance of the Reserve Fund at the end of
that fiscal year and containing an estimate of anticipated expenditures
from the Reserve Fund during the fiscal year in which the report is
submitted.
SEC. 104. COLLECTION OF ASSESSMENTS FROM MILK HANDLERS TO FUND RESERVE
FUND.
(a) Imposition of Assessment.--The Secretary shall require by order
that each milk handler shall pay an assessment on all milk acquired by
the milk handler and marketed for commercial use. In lieu of collecting
an assessment from milk handlers in a State, the Board may accept
payments from the State that--
(1) were collected before the date of the enactment of this
title; and
(2) are paid on behalf of milk handlers in amounts
sufficient to cover the amounts that would be otherwise due
from the milk handlers.
(b) Exceptions.--
(1) Noncommercial public handlers.--The Board may exempt
from paying an assessment those milk handlers that are
noncommercial public users of milk, such as the Armed Forces,
prisons, and schools.
(2) Handlers who are also producers.--A milk handler that
is also a milk producer shall not be subject to an assessment
if the milk handler only markets milk that is the handler's own
production and such milk is produced through a single farming
operation. In light of this exception, a milk handler that
fails to pay an assessment may not submit a claim as a milk
producer under section 105 for losses related to the handler's
bankruptcy.
(c) Amount of Assessment.--The rate of assessment shall be
established by the Board, except that the rate may not exceed two cents
per hundredweight of milk.
(d) Suspension of Assessments.--
(1) Suspension required.--The Board shall suspend the
collection of assessments under this section whenever the
unobligated balance in the Reserve Fund reaches $30,000,000.
(2) Refund of excess assessments.--If the unobligated
balance in the Reserve Fund exceeds $30,000,000 for three
consecutive years, the Secretary shall refund the amount in
excess of $30,000,000 to all milk handlers that are in
operation as of the date the refund is declared and from which
assessments were collected at any time.
(3) Amount of refund.--The amount to be paid as a refund to
a milk handler referred to in paragraph (2) shall bear the same
ratio to the total amount to be refunded as--
(A) the total amount of assessments that would have
been collected from that milk handler during the 12-
month period preceding the refund, if not for the
suspension of assessments under paragraph (1); bears
(B) to the total amount of assessments that would
have been so collected during that period from all milk
handlers referred to in paragraph (2).
(e) Collection and Enforcement.--
(1) Collection.--Assessments under this section shall be
collected and remitted on a monthly basis to the Board for
deposit in the Reserve Fund. The Secretary shall issue an order
prescribing the manner in which assessments are to be collected
and remitted. The Secretary shall oversee the collection of
assessments using the audit system provided under Federal milk
marketing orders issued under section 8c of the Agricultural
Adjustment Act (7 U.S.C. 608c), reenacted with amendments by
the Agricultural Marketing Agreement Act of 1937.
(2) Penalties.--If a milk handler fails to remit the
assessments required under this section or fails to comply with
such requirements for recordkeeping or otherwise as are
required by the Board to carry out this section, the milk
handler shall be liable to the Secretary for a civil penalty in
an amount that is--
(A) in the case of an unintentional violation, not
less than $500 but not more than $5,000; and
(B) in the case of an intentional violation, not
less than $10,000 but not more than $100,000.
(3) Enforcement.--The Secretary may enforce this section in
the courts of the United States.
(f) No Effect on Producer Prices.--Assessments collected under this
section shall not--
(1) reduce the prices paid under the Federal milk marketing
orders issued under section 8c of the Agricultural Adjustment
Act (7 U.S.C. 608c), reenacted with amendments by the
Agricultural Marketing Agreement Act of 1937; or
(2) be deducted from the amounts that milk handlers must
pay to milk producers for milk sold to a milk handler.
SEC. 105. SUBMISSION AND PAYMENT OF CLAIMS OF MILK PRODUCERS FOR
NONPAYMENT FOR MILK SHIPMENTS.
(a) Board Determination of Eligibility.--The Board shall determine
the eligibility of a milk producer to receive a payment from the
Reserve Fund on account of the bankruptcy under title 11, United States
Code, of a milk handler.
(b) Submission of Claim.--To apply for a payment from the Reserve
Fund, a milk producer shall submit a claim to the Board in such form
and containing such information as the Board may require in order to
evaluate the claim. The information required by the Board shall include
the following:
(1) The name of the milk handler the bankruptcy of which
has resulted in the nonpayment to the milk producer for milk
supplied by the milk producer.
(2) The name of the State in which the milk handler is
licensed.
(3) The number of days of milk shipments for which the milk
producer has not been paid on account of the bankruptcy.
(4) The quantity of milk involved in those shipments.
(5) The amount of the payments due to the milk producer for
those shipments that has not been paid.
(c) Eligibility Criteria.--Payments may be made by the Board on a
claim submitted under this section only in the case of the bankruptcy
of a milk handler that is licensed by a State and only with respect to
milk produced by a milk producer after the date of the enactment of
this title.
(d) Amount of Payment.--The total amount paid by the Board under
this section to a milk producer on an approved claim shall be equal to
80 percent of the total amount due to the milk producer and not paid on
account of the bankruptcy for shipments of milk by the milk producer
occurring during the period--
(1) beginning on the date of the first shipment for which
the milk producer is not paid; and
(2) ending 31 days after that date.
(e) Partial Payments.--If monies in the Reserve Fund are
insufficient to make payments under this section in a lump sum, the
Board may pay approved claims on a pro rata basis while funds are
generated through assessments under section 104 to permit payment of
the total amount of the approved claims.
(f) Reimbursement of Payment.--If a milk producer receives a
payment from the Reserve Fund and thereafter recovers any or all of the
money owed by the bankrupt milk handler to that milk producer for the
same milk, the milk producer shall reimburse the Reserve Fund in an
amount equal to the amount recovered from the bankrupt milk handler (or
the estate of the bankrupt milk handler) for the same milk, but not to
exceed the amount the milk producer received from the Reserve Fund.
SEC. 106. PREEMPTION OF STATE OR LOCAL PAYMENT SECURITY PROGRAMS.
The provisions of this title preempt any State or local law,
regulation, requirement, or order with respect to ensuring the payment
of milk producers for milk sold to a milk handler in situations
involving the bankruptcy of the milk handler, including State or local
programs in the form of--
(1) a reserve fund funded by milk handlers to reimburse
milk producers for losses incurred as a result of the
bankruptcy of a milk handler subject to this title;
(2) a statutory trust established for the benefit of milk
producers;
(3) the creation of a priority in favor or for the benefit
of a milk producer, without regard to the order of perfection;
or
(4) any similar payment security requirements, including
surety bonds, letters of credit, pledges of assets, and cash
deposits.
TITLE II--STATUTORY TRUST FOR LIVESTOCK SELLERS
SEC. 201. ESTABLISHMENT OF STATUTORY TRUST FOR BENEFIT OF SELLERS OF
LIVESTOCK TO DEALERS AND MARKET AGENCIES.
Title III of the Packers and Stockyards Act, 1921 (7 U.S.C. 201 et
seq.), is amended by adding at the end the following new section:
``SEC. 318. STATUTORY TRUST ESTABLISHED: LIVESTOCK SELLERS.
``(a) Definitions.--In this section:
``(1) Cash sale.--The term `cash sale' means a sale in
which the seller does not expressly extend credit to the buyer.
``(2) Trust corpus.--The term `trust corpus' means the
following assets of a dealer or market agency subsequent to the
purchase of livestock from a seller in a cash sale:
``(A) Accounts receivable and proceeds derived from
any resulting sale of the livestock by the dealer or
market agency.
``(B) The inventory of the dealer or market agency,
except as provided in subsection (d) regarding the
rights of a bona fide third-party purchaser for value.
``(3) Market agency.--The term `market agency' means any
person engaged in the business of buying in commerce livestock
on a commission basis.
``(b) Establishment of Trust.--A dealer or market agency that
purchases livestock in a cash sale shall hold the trust corpus in trust
for the benefit of the unpaid seller of the livestock until such time
as the seller receives payment in full for the livestock. A payment in
a cash sale shall not be considered to be made if the instrument by
which payment is made is dishonored.
``(c) Loss of Benefit of Trust.--An unpaid seller shall lose the
benefit of the trust under subsection (b) unless the seller gives to
the dealer or market agency and to the Secretary written notice--
``(1) within 15 business days after the seller receives
notice that the payment instrument promptly presented for
payment has been dishonored; or
``(2) within 30 days after the final date for making
payment under section 409.
``(d) Rights of Third-Party Purchaser.--The trust established under
subsection (b) shall have no effect on the rights of a bona fide third-
party purchaser who has purchased livestock from a dealer or market
agency, without regard to whether the livestock are delivered to the
bona fide purchaser.
``(e) Exemption.--This section shall not apply with respect to a
dealer or market agency whose average annual purchases of livestock do
not exceed $250,000.
``(f) Jurisdiction.--The district courts of the United States shall
have jurisdiction in a civil action--
``(1) by the beneficiary of a trust established under
subsection (b) to enforce payment of the amount held in trust;
and
``(2) by the Secretary to prevent and restrain dissipation
of the trust corpus.''.
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