SENATE BILL NO. 1173
June 2, 1998, Introduced by Senators MC MANUS and GOUGEON and referred to the Committee on Farming, Agribusiness and Food Systems. A bill to amend 1939 PA 141, entitled "Grain dealers act," by amending section 7a (MCL 285.67a), as amended by 1992 PA 238. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 7a. (1) An application for a grain dealer's license 2 shall be made on a form provided by the director , AND shall be 3 filed 30 days in advance of a license expiration date if there is 4 an outstanding license. , and IF THE GRAIN DEALER IS A BAILEE 5 OF FARM PRODUCE AND ISSUES WAREHOUSE RECEIPTS OR IS A GRAIN 6 DEALER WHO DOES NOT OWN A FARM PRODUCE OR HANDLING FACILITY OR 7 DOES NOT OWN A VEHICLE USED TO TRANSPORT FARM PRODUCE, THE 8 APPLICATION shall be accompanied by a sufficient bond on a form 9 provided by the director or an irrevocable letter of credit on a 10 form provided by the director in favor of the department of 11 agriculture which fulfills the requirements of subsection (4). 06290'98 LBO 2 1 The bond shall run to the department of agriculture with 2 sufficient surety conditioned for the faithful performance of the 3 duties of a grain dealer and compliance with all laws of this 4 state relating to grain dealers AND APPLY ONLY TO WAREHOUSE 5 RECEIPT TRANSACTIONS. The amount of the bond for a grain dealer 6 who is a bailee of farm produce or AND who issues warehouse 7 receipts shall be $15,000.00 for the first 10,000 bushels of 8 storage capacity of the grain dealer INTENDED FOR STORAGE, 9 plus $5,000.00 for each additional 10,000 bushel capacity or 10 fraction of that capacity used for the storage of warehouse 11 receipted farm produce. The amount of the bond for a grain 12 dealer who does not own a farm produce storage or handling facil- 13 ity or does not own a vehicle used to transport farm produce 14 shall be $50,000.00. 15 (2) A grain dealer issuing price later agreements shall 16 maintain allowable net assets of not less than $20,000.00 and 17 shall comply with 1 or more of the following: 18 (a) Keep the farm produce, fungible farm produce, or farm 19 produce of equivalent value on hand as the dealer's own 20 property. 21 (b) Procure and maintain price later agreements or warehouse 22 receipts in other grain dealers' facilities as approved by the 23 director. 24 (c) Maintain sufficient cash or other short-term secured 25 investments in an escrow account with a financial institution in 26 an amount equal to 80% of the value, established by daily bid 27 price, of any deficiency in the price later agreements. This 06290'98 3 1 deficiency shall be protected by procuring an offsetting purchase 2 commitment. 3 (3) Instead of the bonding requirements in subsection (1), a 4 person owning 2 or more farm produce storage facilities may fur- 5 nish a blanket surety bond equal to the sum of the requirements 6 for the individual facilities, except that when the requirements 7 are equal to or greater than $400,000.00 a blanket bond in the 8 amount of $400,000.00 shall be considered sufficient to meet 9 the requirements of this act. The bond shall show the address 10 and capacity of each facility. THE TERM OF THE BOND SHALL BE 11 CONTINUOUS AND THE TOTAL AND AGGREGATE LIABILITY OF THE SURETY ON 12 THE OBLIGATION SHALL BE LIMITED TO THE AMOUNT SPECIFIED IN THIS 13 SECTION. ALTHOUGH THE OBLIGATION IS CONTINUOUS IN NATURE, THE 14 LIABILITY OF THE SURETY SHALL NOT ACCUMULATE FOR EACH SUCCESSIVE 15 LICENSE PERIOD DURING WHICH THE BOND IS IN EFFECT AND THE LIABIL- 16 ITY SHALL NOT BE AFFECTED BY THE NUMBER OF CLAIMANTS INVOLVED IN 17 THE TRANSACTIONS COVERED BY THAT BOND. 18 (4) A person may submit an irrevocable letter of credit with 19 an application for a grain dealer's license if the letter of 20 credit is in an amount equal to the amount that would otherwise 21 be required by this section for a bond and if it is issued by a 22 financial institution. 23 (5) A financial institution shall not cancel, reduce, or 24 allow the expiration of an irrevocable letter of credit unless 25 the financial institution notifies in writing the department of 26 agriculture not less than 30 days before the effective date of 27 the cancellation, reduction, or expiration. 06290'98 4 1 (6) Upon demand of a grower from whom farm produce is 2 purchased in accordance with a price later agreement, the grain 3 dealer who issues the price later agreement shall grant the 4 grower a security interest in that farm produce as provided in 5 section 9312 of the uniform commercial code, Act No. 174 of the 6 Public Acts of 1962, being section 440.9312 of the Michigan 7 Compiled Laws 1962 PA 174, MCL 440.9312. A security agreement 8 may be on a form which shall be prescribed and provided to grain 9 dealers by the director and which shall include a description of 10 the rights and responsibilities of a grower concerning the secur- 11 ity agreement. A grain dealer shall post a sign to inform grow- 12 ers of the availability of security agreements and forms. 13 (7) Upon the written demand of the department of agricul- 14 ture, a financial institution shall unconditionally pay a claim 15 in an amount specified by the department of agriculture but not 16 greater than the maximum value of the irrevocable letter of 17 credit. Upon the payment of a claim, a financial institution may 18 request the department of agriculture in writing for justifica- 19 tion of the claim. 06290'98 Final page. LBO