2003 Legislation
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HOUSE BILL NO. 307 – Commodity dealer, bond requirements

HOUSE BILL NO. 307

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H0307..................................................by AGRICULTURAL AFFAIRS
COMMODITY DEALERS - Amends existing law dealing with commodity dealers to
provide for irrevocable letters of credit in lieu of bond; to revise
provisions relating to certificates of deposit and irrevocable letters of
credit given in lieu of bond; to revise provisions relating to the amount of
bond; to revise bonding requirements and bonding provisions for certain
commodity dealers; to authorize the Department of Agriculture to make certain
copies; to revise provisions relating to certain records; and to revise
provisions relating to damages for certain injured producers.
                                                                        
02/27    House intro - 1st rdg - to printing
02/28    Rpt prt - to 2nd rdg
03/03    2nd rdg - to 3rd rdg
03/04    3rd rdg - PASSED - 67-0-3
      AYES -- Andersen, Barraclough, Bauer, Bedke, Bell, Bieter, Black, Block,
      Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins, Cuddy, Deal,
      Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge, Field(18),
      Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet, Jones, Kellogg,
      Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin, McKague, Meyer,
      Miller, Mitchell, Moyle, Naccarato, Nielsen, Raybould, Ridinger, Ring,
      Ringo, Roberts, Robison, Rydalch, Sali, Sayler, Schaefer, Shepherd,
      Shirley, Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson,
      Tilman, Trail, Wills, Mr. Speaker
      NAYS -- None
      Absent and excused -- Barrett, Crow, Wood
    Floor Sponsor - Jones
    Title apvd - to Senate
03/05    Senate intro - 1st rdg - to Agric Aff
03/14    Rpt out - rec d/p - to 2nd rdg
03/17    2nd rdg - to 3rd rdg
03/19    3rd rdg - PASSED - 33-0-2
      AYES -- Andreason, Bailey, Bunderson, Burkett, Burtenshaw, Calabretta,
      Cameron, Compton, Darrington, Gannon, Geddes, Goedde, Hill, Ingram,
      Kennedy, Keough, Little, Lodge, Malepeai, Marley, McKenzie, McWilliams,
      Noble, Noh, Pearce, Richardson, Schroeder, Sorensen, Stegner, Stennett,
      Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Brandt, Davis
    Floor Sponsor - Gannon
    Title apvd - to House
03/20    To enrol
03/21    Rpt enrol - Sp signed
03/24    Pres signed
03/25    To Governor
03/27    Governor signed
         Session Law Chapter 149
         Effective: 03/27/03

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 307
                                                                        
                             BY AGRICULTURAL AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE COMMODITY DEALER LAW; AMENDING SECTION 69-506, IDAHO CODE,  TO
  3        PROVIDE  FOR IRREVOCABLE LETTERS OF CREDIT IN LIEU OF BOND, TO PROVIDE FOR
  4        SINGLE BONDS, TO REVISE PROVISIONS RELATING TO CERTIFICATES OF DEPOSIT AND
  5        IRREVOCABLE LETTERS OF CREDIT GIVEN IN LIEU OF BOND, TO REVISE  PROVISIONS
  6        RELATING  TO  THE  AMOUNT  OF  BOND AND TO REVISE BONDING REQUIREMENTS AND
  7        BONDING PROVISIONS FOR CERTAIN COMMODITY DEALERS; AMENDING SECTION 69-511,
  8        IDAHO CODE, TO AUTHORIZE THE DEPARTMENT OF  AGRICULTURE  TO  MAKE  CERTAIN
  9        COPIES; AMENDING SECTION 69-515, IDAHO CODE, TO REVISE PROVISIONS RELATING
 10        TO  CERTAIN RECORDS; AMENDING SECTION 69-522, IDAHO CODE, TO REVISE PROVI-
 11        SIONS RELATING TO DAMAGES OF CERTAIN INJURED PRODUCERS; AND  DECLARING  AN
 12        EMERGENCY.
                                                                        
 13    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 14        SECTION  1.  That  Section  69-506, Idaho Code, be, and the same is hereby
 15    amended to read as follows:
                                                                        
 16        69-506.  BONDING REQUIREMENTS -- CANCELLATION  --  IRREVOCABLE  LETTER  OF
 17    CREDIT  OR  CERTIFICATE  OF  DEPOSIT IN LIEU OF BOND -- SINGLE BOND. Except as
 18    provided in chapter 2, title 69, Idaho Code, an applicant  for  a  license  to
 19    operate  as  a  commodity  dealer shall, before a license will be issued, file
 20    with the department a bond in favor of the commodity  indemnity  fund  with  a
 21    corporate surety approved by the department with the condition that the appli-
 22    cant  will pay the purchase price of any agricultural commodity to the seller.
 23    The aggregate annual liability of the surety shall in no event exceed the  sum
 24    of the bond.
 25        At the discretion of the director, any person required to submit a bond to
 26    the  department  in accordance with this chapter, may give to the department a
 27    certificate of deposit or irrevocable letter of credit payable to the  commod-
 28    ity  indemnity  fund in lieu of the bond required herein. The principal amount
 29    of the certificate of deposit or irrevocable letter of  credit  shall  be  the
 30    same  as  that  required  for  a surety bond pursuant to this chapter. Accrued
 31    interest upon the certificate of deposit shall be payable to the purchaser  of
 32    the  certificate.  The  certificate of deposit or irrevocable letter of credit
 33    shall remain on file with the department until it  is  released,  canceled  or
 34    discharged  by  the  director.  The provisions of this chapter that apply to a
 35    bond required pursuant to this chapter apply to each certificate of deposit or
 36    irrevocable letter of credit given in lieu of such bond.  The  certificate  of
 37    deposit  or irrevocable letter of credit shall remain on file with the depart-
 38    ment until it is released, canceled, or discharged by the director,  or  until
 39    the  director is notified ninety (90) days in advance, by registered or certi-
 40    fied mail, return receipt requested, that the certificate of deposit or irrev-
 41    ocable letter of credit is renewed, canceled or amended. Failure to notify the
 42    director may result in the suspension or revocation of the commodity  dealer's
 43    license. Under the provisions of this chapter, an irrevocable letter of credit
                                                                        
                                           2
                                                                        
  1    or  certificate  of  deposit  shall  not  be accepted unless it is issued by a
  2    national bank or federal thrift institution in Idaho or by  a  state-chartered
  3    bank or thrift institution authorized to conduct business in Idaho and insured
  4    by  the  federal deposit insurance corporation. A certificate of deposit shall
  5    be submitted with an audited  or  reviewed  financial  statement  prepared  in
  6    accordance  with the rules of the department by an independent Idaho certified
  7    public accountant or Idaho licensed public accountant.
  8        The amount of bond for each class 1 license to be furnished for each  com-
  9    modity  dealer  shall be in the sum of twenty-five thousand dollars ($25,000).
 10    The bond for each class 2 license shall be in the sum of fifteen thousand dol-
 11    lars ($15,000) fixed at whichever of the following amounts is greater:
 12        (1)  The combined total indebtedness paid and owed to producers for  agri-
 13    cultural commodity and seed crop for the previous license year; or
 14        (2)  The indebtedness owed and estimated to be owed to producers for agri-
 15    cultural commodity and seed crop for the current license year.
 16        Subsequent  to  determining whichever of the preceding amounts is greater,
 17    and based on that amount, the amount of bond shall be calculated as follows:
                                                                        
 18    Gross Dollars:                     Amount of Bond:
 19    $0 - $450,000                      $20,000 bond or 6% of the gross
 20                                       dollars, whichever is less
 21    $450,001 - $1,000,000              $40,000 bond
 22    $1,000,001 - $8,000,000            $100,000 bond
 23    Over $8,000,000                    $500,000 bond
                                                                        
 24        In any case, the amount of the bond shall not be more  than  five  hundred
 25    thousand  dollars  ($500,000).  A surety shall notify the commodity dealer and
 26    the department by certified mail at least ninety (90) days prior to  the  can-
 27    cellation of a bond issued under the provisions of this chapter. The liability
 28    of  the  surety  shall cover purchases made by the commodity dealer during the
 29    time the bond is in force. A commodity dealer's bond filed with  this  depart-
 30    ment  shall  be continuous until canceled by the surety upon ninety (90) days'
 31    notice. The director reserves the right to waive the ninety (90) day cancella-
 32    tion period.
 33        If a commodity dealer is licensed pursuant to chapter 51, title 22,  Idaho
 34    Code,  that  same  commodity  dealer  may obtain a single bond, certificate of
 35    deposit or irrevocable letter of credit as a surety under chapter 5, title 69,
 36    Idaho Code, and chapter 51, title 22, Idaho Code. If a single  bond,  certifi-
 37    cate of deposit or irrevocable letter of credit is written covering chapter 5,
 38    title 69, Idaho Code, and chapter 51, title 22, Idaho Code, the bond, certifi-
 39    cate  of deposit or irrevocable letter of credit shall be made out in favor of
 40    the commodity indemnity fund and the seed indemnity fund. In the event a  com-
 41    modity  dealer fails as defined in section 69-202(8), Idaho Code, and a single
 42    bond, certificate of deposit or irrevocable letter of  credit  is  written  in
 43    favor of the commodity indemnity fund and seed indemnity fund, the proceeds of
 44    the bond, certificate of deposit or irrevocable letter of credit will be allo-
 45    cated  based  on the dollar amount of the verified claims approved pursuant to
 46    chapter 2, title 69, Idaho Code, and chapter 51, title 22, Idaho Code.
 47        Any person required to submit a bond to the department in accordance  with
 48    this  chapter,  may  at  his  option  give  to the department a certificate of
 49    deposit payable to the commodity indemnity fund in lieu of the  bond  required
 50    herein.  The  principal  amount  of  the certificate shall be the same as that
 51    required for a surety bond pursuant to this chapter.   Accrued  interest  upon
 52    the  certificate  of deposit shall be payable to the purchaser of the certifi-
 53    cate. The certificate shall remain on file with the  department  until  it  is
                                                                        
                                           3
                                                                        
  1    released, canceled or discharged by the director. The provisions of this chap-
  2    ter  that apply to a bond required pursuant to this chapter apply to each cer-
  3    tificate of deposit given in lieu of such bond.  The  certificate  of  deposit
  4    shall  remain  on  file with the department until it is released, canceled, or
  5    discharged by the director, or until the director is notified ninety (90) days
  6    in advance, by registered or certified mail, return  receipt  requested,  that
  7    the  certificate of deposit is renewed, canceled or amended. Failure to notify
  8    the director may result in the  suspension  or  revocation  of  the  commodity
  9    dealer's license.
                                                                        
 10        SECTION  2.  That  Section  69-511, Idaho Code, be, and the same is hereby
 11    amended to read as follows:
                                                                        
 12        69-511.  INSPECTION OF PREMISES, BOOKS AND  RECORDS  --  AUTHORIZATION  TO
 13    COPY.  The department may inspect the premises used by any commodity dealer in
 14    the conduct of his business at any reasonable time. The department  is  autho-
 15    rized  through officials, employees, or agents of the department designated by
 16    it, to examine all books, accounts,  records and papers pertaining to any com-
 17    modity or seed crop purchased, contracted for, or in the  possession  of,  any
 18    commodity  dealer  licensed  under the provisions of this chapter. A commodity
 19    dealer licensed in this state who does not have a place of business within the
 20    state shall, upon the request of the director, make available and  furnish  to
 21    the  department  at  any reasonable time and place the department may set, all
 22    books, accounts, records and papers relating to agricultural commodity  trans-
 23    actions within the state of Idaho. Where there is good cause to believe that a
 24    person is doing business as a commodity dealer in the state of Idaho without a
 25    license,  the department may inspect the books, papers and records of the per-
 26    son which pertain to  agricultural  commodity  purchases.  The  department  is
 27    authorized  to  make copies of any documents or records relevant to compliance
 28    with the provisions of this chapter.
                                                                        
 29        SECTION 3.  That Section 69-515, Idaho Code, be, and the  same  is  hereby
 30    amended to read as follows:
                                                                        
 31        69-515.  CONFIDENTIAL  AND  PROTECTED RECORDS. All financial statements of
 32    commodity dealers Records required under the provisions of this chapter by the
 33    department including, but not  limited  to,  production  summaries,  receiving
 34    records, conditioning reports, records relating to the payment of agricultural
 35    commodities,  commodity indemnity fund and seed indemnity fund reporting forms
 36    of a commodity dealer, and financial records that  are  required  pursuant  to
 37    sections 69-503(6) and 69-521, Idaho Code, shall be subject to disclosure held
 38    confidential  and will be protected as production records according to chapter
 39    3, title 9, Idaho Code. Provided however, that a commodity dealer may  provide
 40    written permission for These records shall not be subject to disclosure of any
 41    of  the commodity dealer's financial statements unless specifically authorized
 42    in writing by the licensee or as otherwise authorized pursuant to  the  provi-
 43    sions of chapter 3, title 9, Idaho Code.
                                                                        
 44        SECTION  4.  That  Section  69-522, Idaho Code, be, and the same is hereby
 45    amended to read as follows:
                                                                        
 46        69-522.  ACTION ON BOND, CERTIFICATE OF DEPOSIT OR IRREVOCABLE  LETTER  OF
 47    CREDIT BY PRODUCERS INJURED. Any producer injured by the breach of any obliga-
 48    tion  for which a bond, certificate of deposit or irrevocable letter of credit
 49    is written, under the provisions of section 69-506, Idaho Code, must  petition
                                                                        
                                           4
                                                                        
  1    the director to make demand upon the commodity dealer, certificate of deposit,
  2    irrevocable  letter  of credit or bond. The director may thereupon make demand
  3    upon the commodity dealer and his surety for payment of such  damages  and  in
  4    the  event  such  damages  are  not promptly paid the director may commence an
  5    action on the bond to enforce payment of such damages. The  liability  of  the
  6    surety  upon  the  bond  required  to be given by the bank on a certificate of
  7    deposit or irrevocable letter of credit, and the surety upon the bond required
  8    to be given by a commodity dealer as provided by section 69-506,  Idaho  Code,
  9    for  any one (1) annual licensing period shall be limited to the amount speci-
 10    fied in the bond, certificate of deposit, or irrevocable letter of credit  and
 11    in  case  of recoveries had by two (2) or more persons producers for violation
 12    of the conditions of such bond this chapter in excess of  the  amount  of  the
 13    bond,  certificate  of deposit, or irrevocable letter of credit, such recovery
 14    shall be prorated and the total recovery as against the surety for any one (1)
 15    annual licensing period shall not exceed the amount of the  bond,  certificate
 16    of  deposit,  or  irrevocable letter of credit. In the event the director sues
 17    and obtains a judgment against the commodity dealer and/or his surety or  bank
 18    for  payment  of such damages under this section chapter, he shall be entitled
 19    to recover a reasonable attorney's fee.
                                                                        
 20        SECTION 5.  An emergency existing  therefor,  which  emergency  is  hereby
 21    declared to exist, this act shall be in full force and effect on and after its
 22    passage and approval.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE
                             RS 13092
Amends the Commodity Dealer law to revise how bonds are
calculated. Bonds, certificates of deposit and letters of credit
will be a matrix based on indebtedness paid and owed to
producers. Removes the minimum bond requirement. This amendment
allows for one bond to cover the Commodity Dealer law and the
Seed Indemnity Fund law. Authorizes the department of agriculture
to make copies of certain books, records, papers, and accounts of
commodity dealers. Adds clarity to the type of financial
institutions authorized to issue a letter of credit or
certificate of deposit. Adds clarity to nomenclature. 

An emergency exists because some commodity dealers are acting as
seed buyers, which also requires a bond, and the seed buyer
license renewals are on July 1. Bonds run concurrent with the
license period.

                         FISCAL IMPACT

There will be no impact to the general fund. Any fiscal impact to
commodity dealers will vary depending on the indebtedness paid
and owed to producers. The bond calculation change will create a
more equitable business environment between warehouses, commodity
dealers and seed buyers as well as limit the exposure to the
commodity indemnity fund and the seed indemnity fund.   













Contact
Name: Russ Dapsauski, ISDA, Warehouse Control Program 
Phone: 208-332-8612




STATEMENT OF PURPOSE/FISCAL NOTE     H 307