2003 Legislation
Print Friendly

HOUSE BILL NO. 154 – Commodity dealer, bond requirements

HOUSE BILL NO. 154

View Daily Data Tracking History

View Bill Text

View Statement of Purpose / Fiscal Impact



Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Daily Data Tracking History



H0154..................................................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.
                                                                        
02/05    House intro - 1st rdg - to printing
02/06    Rpt prt - to Agric Aff

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 154
                                                                        
                             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 in Idaho or by an Idaho state-chartered bank insured by the fed-
  3    eral deposit insurance corporation. A certificate of deposit shall be  submit-
  4    ted  with  an  audited  or reviewed financial statement prepared in accordance
  5    with the rules of the department by  an  independent  Idaho  certified  public
  6    accountant or Idaho licensed public accountant.
  7        The amount of bond for each class 1 license shall be in the sum of twenty-
  8    five thousand dollars ($25,000). The bond for each class 2 license shall be in
  9    the  sum  of  fifteen  thousand dollars ($15,000) fixed at six percent (6%) of
 10    whichever of the following amounts is greater:
 11        (1)  The combined total indebtedness paid and owed to  producers  for  the
 12    previous  year's  commodity  in which the commodity dealer held title, posses-
 13    sion, or control prior to payment to the producer or which was the subject  of
 14    a credit sales contract; or
 15        (2)  The indebtedness owed and estimated to be owed to producers for agri-
 16    cultural commodity or seed crop for the current license year.
 17        In  any  case,  the amount of the bond shall not be more than five hundred
 18    thousand dollars ($500,000). A surety shall notify the  commodity  dealer  and
 19    the  department  by certified mail at least ninety (90) days prior to the can-
 20    cellation of a bond issued under the provisions of this chapter. The liability
 21    of the surety shall cover purchases made by the commodity  dealer  during  the
 22    time  the  bond is in force. A commodity dealer's bond filed with this depart-
 23    ment shall be continuous until canceled by the surety upon ninety  (90)  days'
 24    notice. The director reserves the right to waive the ninety (90) day cancella-
 25    tion period.
 26        If  a commodity dealer is licensed pursuant to chapter 51, title 22, Idaho
 27    Code, that same commodity dealer may obtain  a  single  bond,  certificate  of
 28    deposit or irrevocable letter of credit as a surety under chapter 5, title 69,
 29    Idaho  Code,  and chapter 51, title 22, Idaho Code. If a single bond, certifi-
 30    cate of deposit or irrevocable letter of credit is written covering chapter 5,
 31    title 69, Idaho Code, and chapter 51, title 22, Idaho Code, the bond, certifi-
 32    cate of deposit or irrevocable letter of credit shall be made out in favor  of
 33    the  commodity indemnity fund and the seed indemnity fund. In the event a com-
 34    modity dealer fails as defined in section 69-202(8), Idaho Code, and a  single
 35    bond,  certificate  of  deposit  or irrevocable letter of credit is written in
 36    favor of the commodity indemnity fund and seed indemnity fund, the proceeds of
 37    the bond, certificate of deposit or irrevocable letter of credit will be allo-
 38    cated based on the dollar amount of the verified claims approved  pursuant  to
 39    chapter 2, title 69, Idaho Code, and chapter 51, title 22, Idaho Code.
 40        Any  person required to submit a bond to the department in accordance with
 41    this chapter, may at his option  give  to  the  department  a  certificate  of
 42    deposit  payable  to the commodity indemnity fund in lieu of the bond required
 43    herein. The principal amount of the certificate shall  be  the  same  as  that
 44    required  for  a  surety bond pursuant to this chapter.  Accrued interest upon
 45    the certificate of deposit shall be payable to the purchaser of  the  certifi-
 46    cate.  The  certificate  shall  remain on file with the department until it is
 47    released, canceled or discharged by the director. The provisions of this chap-
 48    ter that apply to a bond required pursuant to this chapter apply to each  cer-
 49    tificate  of  deposit  given  in lieu of such bond. The certificate of deposit
 50    shall remain on file with the department until it is  released,  canceled,  or
 51    discharged by the director, or until the director is notified ninety (90) days
 52    in  advance,  by  registered or certified mail, return receipt requested, that
 53    the certificate of deposit is renewed, canceled or amended. Failure to  notify
 54    the  director  may  result  in  the  suspension or revocation of the commodity
 55    dealer's license.
                                                                        
                                           3
                                                                        
  1        SECTION 2.  That Section 69-511, Idaho Code, be, and the  same  is  hereby
  2    amended to read as follows:
                                                                        
  3        69-511.  INSPECTION  OF  PREMISES,  BOOKS  AND RECORDS -- AUTHORIZATION TO
  4    COPY. The department may inspect the premises used by any commodity dealer  in
  5    the  conduct  of his business at any reasonable time. The department is autho-
  6    rized through officials, employees, or agents of the department designated  by
  7    it, to examine all books, accounts,  records and papers pertaining to any com-
  8    modity  or  seed  crop purchased, contracted for, or in the possession of, any
  9    commodity dealer licensed under the provisions of this  chapter.  A  commodity
 10    dealer licensed in this state who does not have a place of business within the
 11    state  shall,  upon the request of the director, make available and furnish to
 12    the department at any reasonable time and place the department  may  set,  all
 13    books,  accounts, records and papers relating to agricultural commodity trans-
 14    actions within the state of Idaho. Where there is good cause to believe that a
 15    person is doing business as a commodity dealer in the state of Idaho without a
 16    license, the department may inspect the books, papers and records of the  per-
 17    son  which  pertain  to  agricultural  commodity  purchases. The department is
 18    authorized to make copies of any documents or records relevant  to  compliance
 19    with the provisions of this chapter.
                                                                        
 20        SECTION  3.  That  Section  69-515, Idaho Code, be, and the same is hereby
 21    amended to read as follows:
                                                                        
 22        69-515.  CONFIDENTIAL AND PROTECTED RECORDS. All financial  statements  of
 23    commodity dealers Records required under the provisions of this chapter by the
 24    department  including,  but  not  limited  to, production summaries, receiving
 25    records, conditioning reports, records relating to the payment of agricultural
 26    commodities, commodity indemnity fund and seed indemnity fund reporting  forms
 27    of  a  commodity  dealer,  and financial records that are required pursuant to
 28    sections 69-503(6) and 69-521, Idaho Code, shall be subject to disclosure held
 29    confidential and will be protected as production records according to  chapter
 30    3,  title 9, Idaho Code. Provided however, that a commodity dealer may provide
 31    written permission for These records shall not be subject to disclosure of any
 32    of the commodity dealer's financial statements unless specifically  authorized
 33    in  writing  by the licensee or as otherwise authorized pursuant to the provi-
 34    sions of chapter 3, title 9, Idaho Code.
                                                                        
 35        SECTION 4.  That Section 69-522, Idaho Code, be, and the  same  is  hereby
 36    amended to read as follows:
                                                                        
 37        69-522.  ACTION  ON  BOND, CERTIFICATE OF DEPOSIT OR IRREVOCABLE LETTER OF
 38    CREDIT BY PRODUCERS INJURED. Any producer injured by the breach of any obliga-
 39    tion for which a bond, certificate of deposit or irrevocable letter of  credit
 40    is  written, under the provisions of section 69-506, Idaho Code, must petition
 41    the director to make demand upon the commodity dealer, certificate of deposit,
 42    irrevocable letter of credit or bond. The director may thereupon  make  demand
 43    upon  the  commodity  dealer and his surety for payment of such damages and in
 44    the event such damages are not promptly paid  the  director  may  commence  an
 45    action  on  the  bond to enforce payment of such damages. The liability of the
 46    surety upon the bond required to be given by the  bank  on  a  certificate  of
 47    deposit or irrevocable letter of credit, and the surety upon the bond required
 48    to  be  given by a commodity dealer as provided by section 69-506, Idaho Code,
 49    for any one (1) annual licensing period shall be limited to the amount  speci-
 50    fied  in the bond, certificate of deposit, or irrevocable letter of credit and
                                                                        
                                           4
                                                                        
  1    in case of recoveries had by two (2) or more persons producers  for  violation
  2    of  the  conditions  of  such bond this chapter in excess of the amount of the
  3    bond, certificate of deposit, or irrevocable letter of credit,  such  recovery
  4    shall be prorated and the total recovery as against the surety for any one (1)
  5    annual  licensing  period shall not exceed the amount of the bond, certificate
  6    of deposit, or irrevocable letter of credit. In the event  the  director  sues
  7    and  obtains a judgment against the commodity dealer and/or his surety or bank
  8    for payment of such damages under this section chapter, he shall  be  entitled
  9    to recover a reasonable attorney's fee.
                                                                        
 10        SECTION  5.  An  emergency  existing  therefor,  which emergency is hereby
 11    declared to exist, this act shall be in full force and effect on and after its
 12    passage and approval.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE
                             RS 12819
     Amends the Commodity Dealer law to revise how bonds are
calculated.  Bonds, certificates of deposit and letters of credit
will be calculated at 6% of indebtedness paid and owed or
estimated to be paid and owed to producers, whichever is greater. 
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 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 size of the
operation.  The bond calculation change will create a more
equitable business environment between warehouses, commodity
dealers and seed buyers as will as limit the exposure to the
commodity indemnity fund and the seed indemnity fund.
Contact
Name: Russ Dapsauski, Department of Agriculture 
Phone: 332-8612


STATEMENT OF PURPOSE/FISCAL NOTE                         H 154