[Federal Register Volume 62, Number 62 (Tuesday, April 1, 1997)]
[Rules and Regulations]
[Pages 15363-15364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8093]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 205

RIN 0580-AA50


Clear Title--Protection for Purchasers of Farms Products

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document makes final an interim rule amending 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 prior signature of the debtor provided State law authorizes such a 
filing. The interim rule brought the regulations into conformity with 
Sections 662 and 663 of the Federal Agriculture Improvement and Reform 
Act of 1996.

EFFECTIVE DATE: October 22, 1996.

FOR FURTHER INFORMATION CONTACT: Gerald E. Grinnell, 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, (202) 720-7455. 
Kimberly D. Hart, Esquire, Trade Practices Division, Office of the 
General Counsel, STOP 1413, Room 2430, South Building, 1400 
Independence Avenue S.W., Washington, D.C. 20250-1413, (202) 720-8160.

SUPPLEMENTARY INFORMATION:

Background

    An interim rule was published in the Federal Register on October 
22, 1996 (61 FR 54727) which allows electronic filing of effective 
financing statements without the signature of the debtor provided State 
law authorizes such a filing. The interim rules also allows States to 
distribute the master list by electronic means if requested by 
registrants.
    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 which 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. Those regulations (9 CFR 205) 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 (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.
    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 the 
interim rule were impracticable and contrary to the public interest 
under these conditions, and because the rule relieves a regulatory 
restriction, there was good cause under 5 U.S.C. 553 to make it 
effective upon publication.

Comments Received

    Two comments were received in response to the interim rule, one 
from a national bankers association and the other from a State bankers 
association. The comments support removal of the signature requirement 
for effective financing statements and encourage the Department to 
remove the signature requirement for paper-based continuation 
statements. Section 205.209(d) of the regulations currently

[[Page 15364]]

provides that continuation statements are to be treated in the same 
manner as amendments to effective financing statements. The interim 
rule amended section 205.209(c) to allow the electronic filing of 
amendments to effective financing statements without the signature of 
the debtor. Pursuant to section 205.209(d), this change applies to 
electronically filed continuation statements as well. Because the 
purpose of this rulemaking is to implement the amendments to the Act, 
it does not address the commentors' request to eliminate the signature 
requirement for the paper-based continuation statements. We plan to 
address this request in a separate rulemaking.
    After review of the published interim rule and the comments 
received, we have determined that the interim rule as published at 61 
FR 54727 will be adopted as the final rule.

Compliance With Regulatory Requirements

    As set forth in the interim rule published at 61 FR 54727, this 
rulemaking was reviewed under and is issued in conformance with 
Executive Order 12866, Civil Justice Reform (formerly Executive Order 
12778, now Executive Order 12988), and Regulatory Flexibility Act and 
Information Collection requirements. 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 0580-0016.

List of Subjects in 9 CFR Part 205

    Agriculture, Central filing system.

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

    Accordingly, the interim rule amending 9 CFR Part 205 which was 
published at 61 FR 54727 on October 22, 1996, is adopted as a final 
rule without change.

    Dated: March 28, 1997.
James R. Baker,
Administrator, Grain Inspection,
Packers and Stockyards Administration.
[FR Doc. 97-8093 Filed 3-31-97; 8:45 am]
BILLING CODE 3410-EN-P