[Federal Register Volume 61, Number 205 (Tuesday, October 22, 1996)]
[Rules and Regulations]
[Pages 54727-54728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27050]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 205 / Tuesday, October 22, 1996 / 
Rules and Regulations  

[[Page 54727]]



DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 205

RIN 0580-AA13


Clear Title--Protection for Purchasers of Farms Products

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Interim rule.

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SUMMARY: This document amends regulations relating to the establishment 
and management of statewide central filing systems as they pertain 
specifically to the filing of ``effective financing statements'' for 
``farm products'' as defined in section 1324 of the Food Security Act 
of 1985 (7 U.S.C. 1631) by allowing electronic filing of effective 
financing statements without the signature of the debtor provided State 
law authorizes such a filing. This amendment brings the regulations 
into conformity with Sections 662 and 663 of the Federal Agriculture 
Improvement and Reform Act of 1996.

DATES: Interim rule effective October 22, 1996. Consideration will be 
given only to comments received on or before December 23, 1996.

ADDRESSES: To help ensure that comments are considered, send an 
original and three copies to: Industry Analysis Staff, Packers and 
Stockyards Programs, Grain Inspection, Packers and Stockyards 
Administration, STOP 3647, Room 3052, South Building, 1400 Independence 
Avenue S.W., Washington, D.C. 20250-3647. Please state that your 
comments refer to the clear title regulations. Comments received may be 
inspected at the above address during regular office hours, except 
holidays.

FOR FURTHER INFORMATION CONTACT: Gerald E. Grinnell, Director, Industry 
Analysis Staff, Grain Inspection Packers and Stockyards Administration, 
Room 3052, South Building, Washington, D.C. 20250-3647, 202/720-7455. 
Kimberly D. Hart, Esquire, Trade Practices Division, Office of the 
General Counsel, Room 2430, South Building, Washington, D.C. 20250-
1400, 202/720-8160.

SUPPLEMENTARY INFORMATION:

Background

    Section 1324 of the Food Security Act of 1985 (Pub. L. 99-198) (7 
U.S.C. 1631) (hereinafter ``the Act'') provides that certain persons 
may be subject to a security interest in a farm product created by the 
seller under certain circumstances in which a lender files an 
``effective financing statement'' with the ``system operator'' in a 
State that has a certified central filing system as defined by the Act. 
The Act requires the Secretary of Agriculture to prescribe regulations 
``to aid States in the implementation and management of a central 
filing system.'' The Grain Inspection, Packers and Stockyards 
Administration was delegated with the Secretary's responsibilities 
under the Act. Final regulations were published on August 18, 1986 (51 
FR 29450).
    The Secretary's authority and responsibility under the Act is 
limited to certification and prescribing regulations to aid in the 
implementation and management of certified central filing systems. The 
Act does not give the Secretary the authority or responsibility for 
such matters as direct notification by secured parties, sales of and 
payment for products, procedures for payment or procedures for personal 
liability protection. Those matters are governed by State law. The Act 
does not contain any enforcement mechanism for noncompliance with the 
Act or its regulations.
    Section 662 of the Federal Agriculture Improvement and Reform Act 
of 1996 (Pub. L. 104-127) (hereinafter ``the Statute'') amended the Act 
and section 663 of the Statute provided that the amendment become 
effective upon enactment. The Act was amended because of concerns of 
States with certified central filing systems who desired to implement 
electronic filing procedures but could not because of the Act's 
requirement that the debtor must sign the effective financing 
statement. Commercial lenders also expressed concern and confusion due 
to the vagueness of the continuation provisions for effective financing 
statements included in the Act and its inconsistency with Article IX of 
the Uniform Commercial Code.
    Prior to the Act's amendment by the Statute, lenders could not 
electronically file effective financing statements or amendments to the 
effective financing statements with State certified central filing 
systems because such statements were required to contain the signature 
of the debtor which could not be transmitted electronically. The 
amendment contained in the Statute was intended to remedy these 
concerns.
    The interim rule will allow parties to electronically file 
effective financing statements and amendments to effective financing 
statements by removing the requirement of the debtor's signature. The 
interim rule will also allow States to distribute the master list by 
electronic means.

Immediate Action

    Section 662 of the Statute amended the Act. Section 663 of the 
Statute provided that the amendment become effective upon enactment. It 
is therefore necessary to amend the regulations to conform to the 
amendment to the Act.
    Since prior notice and other public procedures with respect to this 
interim rule are impracticable and contrary to the public interest 
under these conditions, and because this rule relieves a regulatory 
restriction, there is good cause under 5 U.S.C. 553 to make it 
effective upon publication. We will consider comments received within 
60 days of publication of this interim rule in the Federal Register. 
After the comment period closes, we will publish another document in 
the Federal Register, including a discussion of any comments we receive 
and any amendments we make to the rule as a result of the comments.

Executive Order 12866

    The Department of Agriculture is issuing this proposal in 
conformance with Executive Order 12866.

Executive Order 12778

    This interim rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This action is not intended to have retroactive 
effect. This rule would not preempt any State or local laws, 
regulations, or policies,

[[Page 54728]]

unless they present an irreconcilable conflict with this rule. There 
are no administrative procedures which must be exhausted prior to any 
judicial challenge to the provisions of this rule.

Regulatory Flexibility Act and Information Collection

    The Administrator, Grain Inspection, Packers and Stockyards 
Administration (GIPSA) has determined that this action will not have a 
significant economic impact on a substantial number of small entities, 
as defined in the Regulatory Flexibility Act, Pub. L. 96-345 (5 U.S.C. 
601). Section 1324 of the Food Security Act of 1985 (Pub. L. 99-198 (7 
U.S.C. 1631)) (hereinafter ``the Act'') was amended by section 662 of 
the Federal Agriculture Improvement and Reform Act of 1996 (hereinafter 
``the Statute''). Section 662 of the Statute provides an alternative 
means of filing effective financing statements. Therefore, small 
entities can choose the filing option that best meets their needs. If 
any cost would be incurred by filing electronically, filing paper 
documents is still acceptable. Therefore, the Administrator has 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities.
    In compliance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
35), the previously approved information collection and recordkeeping 
requirements for 9 CFR Part 205 have been previously approved by the 
Office of Management and Budget under control number 0590-0004.

List of Subjects in 9 CFR Part 205

    Agricultural commodities, Archives and records, Reporting and 
recordkeeping requirements.

    For reasons set out in the preamble, 9 CFR Part 205 is amended as 
set forth below.

PART 205--CLEAR TITLE--PROTECTION FOR PURCHASERS OF FARM PRODUCTS

    1. The authority citation for Part 205 is revised to read as 
follows:

    Authority: Section 1324(I), Pub. L. 99-198, 99 Stat. 1535, 7 
U.S.C. 1631; 7 CFR 2.17 (e)(3), 2.56(a)(3), as amended June 17, 
1986, 51 FR 22795; Sections 662 and 663, Pub. L. 104-127.

    2. Section 205.101 is amended by revising paragraph (b)(11)(iii) 
and adding paragraph (e) to read as follows:


Sec. 205.101  Certification-request and processing.

* * * * *
    (b) * * *
    (11) * * *
    (iii) All printed and electronic forms required to be used in 
connection with the system.
    (c) * * *
    (d) * * *
    (e) To make changes to an existing certified central filing system, 
including changes necessitated or made possible by amendments to the 
Act, a written request to amend the existing certified central filing 
system must be filed together with such documents as are necessary to 
show that the system complies with the Act. The request must contain 
relevant new information consistent with the requirements specified 
elsewhere in this section.
    3. Section 205.105 is amended by revising paragraph (b) to read as 
follows:


Sec. 205.105  Master list and portion thereof distributed to 
registrants--format.

* * * * *
    (b) Section (c)(2)(E) requires the portion to be distributed in 
``written or printed form.'' This means recording on paper by any 
technology in a form that can be read by humans without special 
equipment. The system may, however, honor requests from registrants to 
substitute recordings on any medium by any technology including, but 
not limited to, electronic recording on tapes or discs in machine-
readable form, and on photographic recording on microfiche. It also 
includes, if requested by registrants, electronic transmissions whereby 
registrants can print their own paper copies.
* * * * *
    4. Section 205.202 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 205.202  ``Effective financing statement'' or EFS.

* * * * *
    (b) An EFS may be filed electronically provided a State allows 
electronic filing of financing statements without the signature of the 
debtor under applicable State law under provisions of the Uniform 
Commercial Code or may be a paper document. An electronically filed EFS 
need not be a paper document and need not be signed. If an original or 
reproduced paper document of an EFS is filed with the State, it must be 
signed by both the secured party and the debtor, and be filed by the 
secured party.
    (c) Countermeasures against mishandling after filing, such as a 
requirement that a copy be date stamped and returned to the secured 
party, are discretionary with the State. If a State chooses to adopt 
such countermeasures, it is responsible for establishing procedures for 
recording the date and time when an EFS is received, and for meeting 
all legal requirements associated with filing and distributing 
information about security interests as required by Sec. 205.101.
    5. Section 205.209 is amended by revising paragraph (c) to read as 
follows:


Sec. 205.209  Amendment or continuation of EFS.

* * * * *
    (c) The amendment must be filed in the same manner as the original 
filing. Note the requirement of section (c)(4)(E). The amendment may be 
filed electronically provided a State allows electronic filing of 
financing statements without the signature of the debtor under 
applicable State law under provisions of the Uniform Commercial Code. 
An electronically filed amendment need not be signed. However, if an 
original or reproduced paper document is filed, the amendment must be 
signed by the secured party and the debtor, and be filed by the secured 
party.
* * * * *
    Dated: October 16, 1996.
David R. Shipman,
Acting Administrator, Grain Inspection, Packers and Stockyards 
Administration.
[FR Doc. 96-27050 Filed 10-21-96; 8:45 am]
BILLING CODE 3410-EN-P