< Back to H.R. 3762 (104th Congress, 1995–1996)

Text of the Dairy and Livestock Producer Protection Act of 1996

This bill was introduced on July 9, 1996, in a previous session of Congress, but was not enacted. The text of the bill below is as of Jul 9, 1996 (Introduced).

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HR 3762 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.’.