2008 Legislation
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HOUSE BILL NO. 427<br /> – Agriculture, warehouses, licensure

HOUSE BILL NO. 427

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H0427...............................................by AGRICULTURAL AFFAIRS
AGRICULTURE - WAREHOUSES - Amends existing law to revise definitions; to
provide license requirements and conditions for public warehouses; and to
require certain licenses for warehousemen who purchase agricultural
commodities by credit-sale contracts.

01/25    House intro - 1st rdg - to printing
01/28    Rpt prt - to Agric Aff

Bill Text




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 427

                             BY AGRICULTURAL AFFAIRS COMMITTEE

  1                                        AN ACT
  2    RELATING TO PUBLIC WAREHOUSES; AMENDING SECTION 69-202, IDAHO CODE, TO  REVISE
  3        DEFINITIONS  AND TO DEFINE A TERM; AMENDING SECTION 69-203, IDAHO CODE, TO
  4        PROVIDE LICENSE REQUIREMENTS FOR PUBLIC WAREHOUSES AND TO MAKE A TECHNICAL
  5        CORRECTION; AMENDING SECTION 69-206,  IDAHO  CODE,  TO  REVISE  CONDITIONS
  6        RELATING TO THE ISSUANCE OR RENEWAL OF PUBLIC WAREHOUSE LICENSES; AMENDING
  7        SECTION  69-249,  IDAHO CODE, TO REQUIRE CERTAIN LICENSES FOR WAREHOUSEMEN
  8        WHO PURCHASE AGRICULTURAL COMMODITIES BY CREDIT-SALE CONTRACTS; AND AMEND-
  9        ING SECTIONS 69-208, 69-262 AND 69-506, IDAHO  CODE,  TO  PROVIDE  CORRECT
 10        CODE CITATIONS.

 11    Be It Enacted by the Legislature of the State of Idaho:

 12        SECTION  1.  That  Section  69-202, Idaho Code, be, and the same is hereby
 13    amended to read as follows:

 14        69-202.  DEFINITIONS. As used in this chapter:
 15        (1)  "Agricultural commodity"  or  "commodity"  means  any  feeds,  grain,
 16    wheat,  barley, oats, corn, rye, oilseeds, dry edible beans, peas, lentils and
 17    other leguminous seeds and feeds (not including minerals or seed crops) or any
 18    other commodity as determined by the director.
 19        (2)  "Commodity dealer" or "dealer" means any person  who  solicits,  con-
 20    tracts  for, or obtains from an Idaho producer or producers, title, possession
 21    or control of any agricultural commodity through his place of business located
 22    in the state of Idaho or through his place of  business  located  outside  the
 23    state of Idaho for the purposes of sale or resale or who buys, during a calen-
 24    dar year, at least ten twenty-five thousand dollars ($1025,000) worth of agri-
 25    cultural  commodities  from an Idaho producer or producers of the commodities.
 26    Commodity dealer or dealer shall not mean any person  who  purchases  agricul-
 27    tural commodities for his own use as seed or feed within his own operation.
 28        (3)  "Contract"  means a written agreement between two (2) or more parties
 29    for the sale of an agricultural commodity stipulating the terms and conditions
 30    of performance of the parties and includes, but is not limited to, those  con-
 31    tracts  commonly  referred to as credit sales, deferred payment, delayed, pro-
 32    duction, bailment or price later contracts.
 33        (4)  "Credit-sale contract" means a contract for the sale of  an  agricul-
 34    tural  commodity pursuant to which the sale price is to be paid at a date sub-
 35    sequent to the delivery  of  the  agricultural  commodity  to  the  buyer  and
 36    includes,  but  is  not  limited  to,  those contracts commonly referred to as
 37    deferred payment contracts, deferred pricing contracts and  price  later  con-
 38    tracts.
 39        (5)  "Deliver"  or  "delivery" means the physical transfer of agricultural
 40    commodity from one (1) party to another.
 41        (56)  "Department" means the Idaho state department of agriculture.
 42        (67)  "Depositor" means any person who deposits an agricultural  commodity
 43    in an Idaho state licensed warehouse for storage, handling, processing, recon-

                                       2

  1    ditioning  or  shipment,  or  who is the owner or legal holder of a negotiable
  2    warehouse receipt, outstanding scale weight  ticket,  nonnegotiable  warehouse
  3    receipt  or  other  evidence of such deposit, or any person whose agricultural
  4    commodity has been sold to or is under control of a warehouseman for  selling,
  5    processing,  reconditioning  or handling whether or not such agricultural com-
  6    modity is within the warehouse.
  7        (78)  "Director" means the director of the Idaho state department of agri-
  8    culture.
  9        (89)  "Failure" means the date that one  (1)  or  more  of  the  following
 10    events occurred, as determined by the director:
 11        (a)  An inability to financially satisfy claimants in accordance with this
 12        chapter and the time limits provided for in it;
 13        (b)  A public declaration of insolvency;
 14        (c)  A  revocation  of license and the leaving of an outstanding indebted-
 15        ness to a depositor or producer;
 16        (d)  A failure to redeliver  any  commodity  to  a  depositor  or  to  pay
 17        depositors  or producers for commodities purchased by a licensee or to pay
 18        a producer for commodity delivered under the provisions of the contract in
 19        the ordinary course of business;
 20        (e)  A failure to make application for license renewal within  sixty  (60)
 21        days after the annual license renewal date; or
 22        (f)  A denial of the application for a license renewal.
 23        (910) "Historical depositor" means any person who, in the normal course of
 24    business  operation  has  consistently  made deposits in the same warehouse of
 25    commodities produced on the same land. In addition, anyone purchasing or leas-
 26    ing that particular land directly from the  original  depositor  or  receiving
 27    that  particular  land  by  devise, descent, bequest or gift directly from the
 28    historical depositor shall also be considered  an  historical  depositor  with
 29    regard to the commodities produced on that land.
 30        (101) "Person" means any individual, firm, association, corporation, part-
 31    nership or limited liability company.
 32        (112) "Producer" means the owner, tenant or operator of land in this state
 33    who  has an interest in the proceeds from the sale of agricultural commodities
 34    produced on that land. Producer does not include  growers  who  deposit  their
 35    commodity in a facility in which they have a financial or management interest,
 36    except  members of a cooperative marketing association qualified under chapter
 37    26, title 22, Idaho Code.
 38        (123) "Public warehouse" or "warehouse" or "warehouseman" means any eleva-
 39    tor, mill, warehouse, subterminal commodity  warehouse,  public  warehouse  or
 40    other structure or facility in which agricultural commodities are received for
 41    storage, shipment, processing, reconditioning or handling.
 42        (134) "Receipt" means a warehouse receipt.
 43        (145) "Revocation" means the permanent removal of a warehouse license fol-
 44    lowing  a  hearing  on  violations  of  this chapter by the hearing officer or
 45    director.
 46        (156) "Scale weight ticket" means a load slip  or  other  evidence,  other
 47    than a receipt, given to a depositor by a warehouseman licensed under the pro-
 48    visions  of  this chapter, upon initial delivery of the commodity to the ware-
 49    house.
 50        (167) "Seed crops" means any seed crop regulated by chapter 4,  title  22,
 51    Idaho Code.
 52        (178) "Subterminal warehouse" means any warehouse at which an intermediate
 53    function  is  performed  in  which  agricultural  commodities  are customarily
 54    received from dealers rather than producers  and  where  the  commodities  are
 55    accumulated prior to shipment.

                                       3

  1        (189) "Suspension"  means  the temporary removal of a warehouse license by
  2    the department pending a hearing for violations of this chapter. Correction of
  3    the violations prior to a hearing may result in the reinstatement of a license
  4    without a hearing.
  5        (1920) "Termination" means the expiration of a warehouse  license  due  to
  6    failure  to  meet minimum licensing requirements, failure to renew a warehouse
  7    license or as  requested by the licensee, unless a complaint  has  been  filed
  8    against the licensee alleging a violation of any provision of this chapter.
  9        (201) "Transfer"  means,  unless otherwise defined by the parties in writ-
 10    ing, the event when a producer or his agent delivers a commodity  to  a  ware-
 11    houseman, who then weighs the commodity, and gives the producer or his agent a
 12    scale weight ticket or other written evidence of transfer.
 13        (212) "Warehouse  receipt" means every receipt, whether negotiable or non-
 14    negotiable, issued by a warehouseman, except scale weight tickets.
 15        (223) "Warehouseman" means a person  operating  or  controlling  a  public
 16    warehouse.

 17        SECTION  2.  That  Section  69-203, Idaho Code, be, and the same is hereby
 18    amended to read as follows:

 19        69-203.  LICENSE NECESSARY TO OPERATE PUBLIC WAREHOUSE. (1) Before a  per-
 20    son  can  lawfully operate a public warehouse in this state, he must procure a
 21    license under this chapter; provided however, that the  foregoing  requirement
 22    as  to  licenses  is  not  applicable  to any warehouse or warehouseman who is
 23    licensed under an act of congress approved August 11,  1916  (39  Statutes  at
 24    Large  44 486) and acts amendatory thereof, commonly called the "United States
 25    Warehouse Act," and who is licensed under chapter 5, title 69, Idaho Code.
 26        (2)  The type of license required shall be determined as follows:
 27        (a)  A class 1 license is required if the warehouseman acts  as  a  public
 28        warehouse  and  purchases agricultural commodities by credit-sale contract
 29        or if the value of the agricultural commodities  purchased  by  the  ware-
 30        houseman  from  producers  during  the  previous  twelve (12) month period
 31        exceeds five hundred thousand dollars ($500,000), or if the value  of  the
 32        agricultural commodities expected to be purchased by the warehouseman from
 33        the  producers  during the succeeding twelve (12) month period will exceed
 34        five hundred thousand dollars ($500,000). Any other warehouseman may elect
 35        to be licensed as a class 1 public warehouse.
 36        (b)  A class 2 license is required if the warehouseman acts  as  a  public
 37        warehouse  and  if  the value of the agricultural commodities purchased by
 38        the warehouseman from producers during  the  previous  twelve  (12)  month
 39        period  exceeds  twenty-five  thousand  dollars ($25,000) and is less than
 40        five hundred thousand dollars ($500,000), and if the value of the agricul-
 41        tural commodities expected to be purchased by the  warehouseman  from  the
 42        producers during the succeeding twelve (12) month period will be more than
 43        twenty-five thousand dollars ($25,000) but less than five hundred thousand
 44        dollars  ($500,000).  A  class  2  licensee whose purchases from producers
 45        exceed five hundred thousand dollars ($500,000) in value during any twelve
 46        (12) month period shall immediately apply for a  class  1  license.  If  a
 47        class  1 license is denied, the warehouseman shall immediately cease doing
 48        business as a public warehouse.

 49        SECTION 3.  That Section 69-206, Idaho Code, be, and the  same  is  hereby
 50    amended to read as follows:

 51        69-206.  LICENSES TO WAREHOUSEMEN -- ISSUE -- RENEWAL -- CONDITIONS PRECE-

                                       4

  1    DENT.  The department is authorized, upon application to it, to issue or renew
  2    to any  warehouseman a license for the conduct of a warehouse or warehouses in
  3    accordance with this chapter and such rules as may be made hereunder,  provid-
  4    ing the following conditions are met:
  5        (1)  Each  person,  as  a  condition precedent to operating a warehouse in
  6    this state, shall file and maintain satisfactory evidence with the director of
  7    the existence of an effective policy of insurance issued by an insurance  com-
  8    pany  authorized  to do business in this state, insuring all agricultural com-
  9    modities that may be stored or accepted for storage on the premises, including
 10    commodities owned by the warehouseman, for which such license  is  sought  for
 11    the  full  market value of such agricultural commodities against loss by fire,
 12    internal explosion, lightning or tornado;
 13        (2)  That each warehouse be found suitable for the proper storage  of  the
 14    particular  agricultural  commodity  or  commodities  for  which  a license is
 15    requested;
 16        (3)  A license fee is submitted to the department as prescribed by section
 17    69-211, Idaho Code;
 18        (4)  A current drawing of the warehouse which shows storage facilities and
 19    the capacity calculations of the warehouse which indicates commodity and  seed
 20    crop storage areas, shall be approved by the department;
 21        (5)  A  sufficient  and  valid bond is filed and maintained as required by
 22    section 69-208, Idaho Code;
 23        (6)  The applicant shall submit to the department an audited  or  reviewed
 24    financial  statement prepared by an independent certified public accountant or
 25    licensed public accountant showing that the licensee  has  and  does  maintain
 26    current  assets  equal  to or greater than current liabilities, a statement of
 27    current assets and current liabilities, and a statement of net worth,  all  of
 28    which shall be prepared in accordance with generally accepted accounting prin-
 29    ciples.  If  a  public  warehouse does not maintain current assets equal to or
 30    greater than current liabilities at the end of each business  day,  the  ware-
 31    houseman  shall immediately contact the department and cease doing business as
 32    a public warehouse;
 33        (7)  For a warehouseman license an applicant shall have and maintain a net
 34    worth of at least fifty thousand dollars ($50,000) or maintain a bond  in  the
 35    amount of two thousand dollars ($2,000) for each one thousand dollars ($1,000)
 36    or  fraction  thereof  of  net  worth financial requirement; however, a person
 37    shall not be licensed as a warehouseman if the person has a net worth of  less
 38    than  twenty-five thousand dollars ($25,000). A bond submitted for purposes of
 39    this subsection shall be in addition to any bond otherwise required under  the
 40    provisions  of this chapter; In order to receive and retain a public warehouse
 41    license the following additional conditions must be satisfied:
 42        (a)  For a class 1 license a public warehouse shall have  and  maintain  a
 43        net  worth  of  at least two hundred thousand dollars ($200,000). Provided
 44        however, for those public warehouses licensed prior to July 1, 2007,  that
 45        were at the time of licensing required to maintain a net worth of at least
 46        fifty  thousand  dollars  ($50,000), that are continually licensed through
 47        December 2010, their net worth requirement shall increase by  fifty  thou-
 48        sand  dollars  ($50,000)  per  license year until the two hundred thousand
 49        dollar ($200,000) net worth minimum is reached which  shall  be  no  later
 50        than  December 31, 2010. In the event a public warehouse licensed prior to
 51        July 1, 2007, shall at any time prior to December 31, 2010,  cease  to  be
 52        licensed,  and  shall  thereafter  again apply for a class 1 license, they
 53        shall be required to have and maintain a net worth of at least two hundred
 54        thousand dollars ($200,000). A class 1 public  warehouse  shall  have  and
 55        maintain,  at  all  times, grain assets plus liquidity equal to or greater

                                       5

  1        than grain liabilities. Guidelines relating to grain assets, liquidity and
  2        grain liabilities shall be promulgated by rule. If a public warehouse does
  3        not maintain the minimum net worth at the end of each  business  day,  the
  4        warehouseman  shall  immediately  contact  the  department and cease doing
  5        business as a public warehouse.
  6        (b)  For a class 2 license a public warehouse shall have  and  maintain  a
  7        net  worth of at least fifty thousand dollars ($50,000) or maintain a bond
  8        in the amount of two thousand dollars ($2,000) for each one thousand  dol-
  9        lars ($1,000) or fraction thereof of net worth deficiency; however, a per-
 10        son  shall not be licensed as a class 2 public warehouse if the person has
 11        a net worth of less than twenty-five thousand dollars  ($25,000).  A  bond
 12        submitted for purposes of this subsection shall be in addition to any bond
 13        otherwise required under the provisions of this chapter. If a public ware-
 14        house  does not maintain the minimum net worth at the end of each business
 15        day, the warehouseman shall immediately contact the department  and  cease
 16        doing business as a public warehouse.
 17        (8)  The  applicant  has complied with and abided by all the terms of this
 18    chapter and the rules prescribed hereunder;
 19        (9)  That all materials  required  for  renewal  of  a  license  shall  be
 20    received  by  the  department  prior  to  the expiration date of the warehouse
 21    license. A warehouse license which  has  expired  may  be  reinstated  by  the
 22    department  upon  receipt of all necessary licensing materials required by the
 23    provisions of this chapter and a reinstatement fee in the amount of five  hun-
 24    dred  dollars ($500), providing that this material is filed within thirty (30)
 25    days from the date of expiration of the warehouse license. At the end  of  the
 26    thirty  (30) day reinstatement period, a warehouse license shall be terminated
 27    by the department. All license applications completed and received  after  the
 28    thirty (30) day reinstatement period shall be considered original applications
 29    and  after  the five hundred dollar ($500) reinstatement fee has been remitted
 30    to the department, license fees shall be assessed as original  fees  according
 31    to section 69-211, Idaho Code.

 32        SECTION  4.  That  Section  69-249, Idaho Code, be, and the same is hereby
 33    amended to read as follows:

 34        69-249.  CREDIT-SALE CONTRACTS. (1) A warehouseman who purchases  agricul-
 35    tural  commodities  by  credit-sale  contracts  shall have in effect a current
 36    class 1 public warehouse license and maintain books, records and  other  docu-
 37    ments  as  required  by the department to establish compliance with the provi-
 38    sions of this section.
 39        (2)  In addition to other information as may be  required,  a  credit-sale
 40    contract shall contain or provide, but not be limited to:
 41        (a)  The seller's name and address;
 42        (b)  The conditions of delivery;
 43        (c)  The amount, kind and class of agricultural commodities delivered;
 44        (d)  The price per unit or basis of value;
 45        (e)  The date payment is to be made; and
 46        (f)  Any enhancements to the value of the contract, which may include, but
 47        are  not  limited  to, transportation, premiums of any nature, or producer
 48        provided services, must be listed separately and apart from the price  per
 49        unit of the commodity.
 50        (3)  Title to all agricultural commodities sold by credit-sale contract is
 51    in  the purchaser as of the time the contract is executed, unless the contract
 52    provides otherwise. The contract must be signed by both parties  and  executed
 53    in  duplicate.  One (1) copy shall be retained by the warehouseman and one (1)

                                       6

  1    copy shall be delivered to the seller. Upon revocation  or  termination  of  a
  2    warehouseman's  license,  the payment date for all credit-sale contracts shall
  3    be advanced to a date not later than thirty (30) days following the  effective
  4    date  of the revocation or termination and the purchase price for all agricul-
  5    tural commodities without a price shall be determined as of the effective date
  6    of revocation or termination in accordance with all other  provisions  of  the
  7    contract.  In  the  event claims are submitted to the commodity indemnity fund
  8    following a declared failure, the value determination  of  contracts  will  be
  9    controlled by the provisions of section 69-262, Idaho Code, and the rules pro-
 10    mulgated  pursuant to the provisions of this chapter. However, if the business
 11    of the warehouseman is sold to another licensed warehouseman, credit-sale con-
 12    tracts may be assigned to the purchaser of the business.

 13        SECTION 5.  That Section 69-208, Idaho Code, be, and the  same  is  hereby
 14    amended to read as follows:

 15        69-208.  BOND  OF  APPLICANT  FOR LICENSE -- ADDITIONAL BOND -- ADDITIONAL
 16    OBLIGATIONS -- CERTIFICATE OF DEPOSIT OR IRREVOCABLE LETTER OF CREDIT IN  LIEU
 17    OF  BOND -- SINGLE BOND. Each warehouseman applying for a license to conduct a
 18    warehouse in accordance with this chapter shall, as a condition to the  grant-
 19    ing  thereof,  execute and file with the department a good and sufficient bond
 20    other than personal security. The bond shall be  in  favor  of  the  commodity
 21    indemnity  fund  to  secure  the  faithful performance of his obligations as a
 22    warehouseman under all the laws of the state, including obligations arising by
 23    operation of the commodity indemnity fund program, and  the  rules  prescribed
 24    hereunder,  and  of  such  additional  obligations as a warehouseman as may be
 25    assumed by him under contracts with the respective depositors of  agricultural
 26    commodities  in  such  warehouse.  Said bond shall be in such form and amount,
 27    shall have such surety or sureties, and shall contain such  terms  and  condi-
 28    tions  as the department may prescribe to carry out the purposes of this chap-
 29    ter. Whenever the department shall determine that a bond approved by it is, or
 30    for any cause has become, insufficient, it shall require an additional bond or
 31    bonds to be given by the warehouseman concerned, conforming with the  require-
 32    ments of this section, and unless the same be given within the time fixed by a
 33    written demand therefor the license of such warehouseman shall be suspended or
 34    revoked.
 35        The bond shall be approved by the department and shall be conditioned upon
 36    the  faithful performance by the warehouseman of the duty to keep in the ware-
 37    house for the depositor the agricultural commodity delivered  and  to  deliver
 38    the  agricultural  commodity to or for such depositors. The bond shall also be
 39    conditioned upon the faithful performance by the  warehouseman  of  any  addi-
 40    tional obligations involving marketing transactions with a depositor.
 41        The  warehouseman  may give a single bond meeting the requirements as pro-
 42    vided in this chapter and all warehouses operated by the warehouseman shall be
 43    as one (1) warehouse for the purpose of compliance with the provisions of this
 44    section. At the discretion of the director, any person required  to  submit  a
 45    bond  to  the  department  in  accordance  with  this chapter, may give to the
 46    department a certificate of deposit or an irrevocable letter of credit payable
 47    to the commodity indemnity fund in lieu of the bond required herein. The prin-
 48    cipal amount of the certificate of deposit or  irrevocable  letter  of  credit
 49    shall be the same as that required for a surety bond pursuant to this chapter.
 50    Accrued interest upon the certificate of deposit shall be  payable to the pur-
 51    chaser  of the certificate. The irrevocable letter of credit or certificate of
 52    deposit shall remain on file with the department until it  is  released,  can-
 53    celed  or  discharged by the director or until the director is notified ninety

                                       7

  1    (90) days  in  advance,  by  registered  or  certified  mail,  return  receipt
  2    requested,  that the irrevocable letter of credit or certificate of deposit is
  3    renewed, canceled or amended. Failure to notify the director may result in the
  4    suspension or revocation of the bonded warehouse license.  The  provisions  of
  5    this  chapter  that apply to a bond required pursuant to this chapter apply to
  6    each certificate of deposit or irrevocable letter of credit given in  lieu  of
  7    such bond.
  8        Under  provisions of this chapter, an irrevocable letter of credit or cer-
  9    tificate of deposit shall not be acceptable unless it is issued by a  national
 10    bank  or  federal  thrift institution in Idaho or by a state-chartered bank or
 11    thrift institution authorized to conduct business in Idaho and insured by  the
 12    federal deposit insurance corporation.
 13        Any  changes  in  the  capacity  of a warehouse or installation of any new
 14    warehouses involving a change in the bond liability under  the  provisions  of
 15    this  chapter  shall  be  reported  to  the  department prior to the operation
 16    thereof.
 17        If a warehouseman is licensed pursuant to  chapter  51,  title  22,  Idaho
 18    Code,  that same warehouseman may obtain a single bond, certificate of deposit
 19    or irrevocable letter of credit as surety for both chapter 2, title 69,  Idaho
 20    Code,  and  chapter 51, title 22, Idaho Code. If a single bond, certificate of
 21    deposit or irrevocable letter of credit is written covering chapter  2,  title
 22    69, Idaho Code, and chapter 51, title 22, Idaho Code, the bond, certificate of
 23    deposit or irrevocable letter of credit shall be made out in favor of the com-
 24    modity indemnity fund and the seed indemnity fund. In the event a warehouseman
 25    fails as defined in section 69-202(89), Idaho Code, and a single bond, certif-
 26    icate  of  deposit  or irrevocable letter of credit is written in favor of the
 27    commodity indemnity fund and seed indemnity fund, the proceeds  of  the  bond,
 28    certificate of deposit or irrevocable letter of credit will be allocated based
 29    on  the  dollar  amount of the verified claims approved pursuant to chapter 2,
 30    title 69, Idaho Code, and chapter 51, title 22, Idaho Code.

 31        SECTION 6.  That Section 69-262, Idaho Code, be, and the  same  is  hereby
 32    amended to read as follows:

 33        69-262.  PROOF  OF  CLAIMS  -- PROCEDURE -- HEARING -- INSPECTION OF WARE-
 34    HOUSE. In the event a  warehouse  or  dealer  fails,  as  defined  in  section
 35    69-202(89),  Idaho  Code, the department shall process the claims of producers
 36    who have paid or owe assessments as required by this chapter. Claims against a
 37    failed warehouse or dealer shall include written evidence disclosing a storage
 38    obligation or a sale or delivery of commodities.
 39        (1)  The department shall give notice and provide a reasonable time of not
 40    less than thirty (30) days and not more than sixty (60) days to  producers  to
 41    file  their  written verified claims, including any written evidence, with the
 42    department.
 43        (2)  The department shall investigate each claim  and  shall  notify  each
 44    claimant,  the  warehouseman  or  dealer,  and  the  advisory committee of the
 45    department's determination as to the validity and amount  of  each  claimant's
 46    claim.  A  claimant  or  warehouseman  or  dealer may request a hearing on the
 47    department's determination within twenty (20) days of receipt of written noti-
 48    fication and a hearing shall be held by the department pursuant to chapter 52,
 49    title 67, Idaho Code. Upon determining the amount and validity of  the  claim,
 50    the director shall pay to the claimant an amount equal to ninety percent (90%)
 51    of  the approved claim from the commodity indemnity fund. Prior to any payment
 52    from the fund to a claimant, the claimant  shall be required to subrogate  and
 53    assign his right to recover from any other source. The department may then pay

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  1    up  to ninety percent (90%) of the approved claim to the claimant. The depart-
  2    ment shall have a priority claim for that amount. The claimant shall be  enti-
  3    tled  to seek recovery of the remaining ten percent (10%) which was not origi-
  4    nally assigned to the department. For the purpose of determining the amount of
  5    the producer's claim, the value of a producer's commodity shall be the  lesser
  6    of: (a) the value of the commodity on the date the director declared the ware-
  7    house or dealer to have failed or to have failed to comply with the provisions
  8    of  this  chapter  or  rules promulgated thereunder; (b) the contract price as
  9    listed on a valid contract; or (c) the value of the commodity  represented  on
 10    the  contract  on  the date the contract was signed. The value shall be deter-
 11    mined by a survey of the available market price reports or markets of  similar
 12    facilities within the same geographic location as the failed facility.
 13        (3)  The  department  may  inspect  and  audit  a  failed warehouseman  or
 14    dealer. In the event of  a  shortage,  the  department  shall  determine  each
 15    producer's pro rata share of available commodities and the deficiency shall be
 16    considered as a claim of the producer. Each type of commodity shall be treated
 17    separately for the purpose of determining shortages.
 18        (4)  The director shall not approve or pay any claim made on the commodity
 19    indemnity  fund  if  the  claim is based on losses resulting from the deposit,
 20    sale or storage of commodities in an unlicensed warehouse or dealer.
 21        (5)  The fund shall not be liable for claims filed against a warehouse  or
 22    dealer in good standing who has voluntarily relinquished their license if such
 23    claims are not filed with the department within six (6) months of the closing.

 24        SECTION  7.  That  Section  69-506, Idaho Code, be, and the same is hereby
 25    amended to read as follows:

 26        69-506.  BONDING REQUIREMENTS -- CANCELLATION  --  IRREVOCABLE  LETTER  OF
 27    CREDIT  OR  CERTIFICATE  OF  DEPOSIT IN LIEU OF BOND -- SINGLE BOND. Except as
 28    provided in chapter 2, title 69, Idaho Code, an applicant  for  a  license  to
 29    operate  as  a  commodity  dealer shall, before a license will be issued, file
 30    with the department a bond in favor of the commodity  indemnity  fund  with  a
 31    corporate surety approved by the department with the condition that the appli-
 32    cant  will pay the purchase price of any agricultural commodity to the seller.
 33    The aggregate annual liability of the surety shall in no event exceed the  sum
 34    of the bond.
 35        At the discretion of the director, any person required to submit a bond to
 36    the  department  in accordance with this chapter, may give to the department a
 37    certificate of deposit or irrevocable letter of credit payable to the  commod-
 38    ity  indemnity  fund in lieu of the bond required herein. The principal amount
 39    of the certificate of deposit or irrevocable letter of  credit  shall  be  the
 40    same  as  that  required  for  a surety bond pursuant to this chapter. Accrued
 41    interest upon the certificate of deposit shall be payable to the purchaser  of
 42    the  certificate.  The  certificate of deposit or irrevocable letter of credit
 43    shall remain on file with the department until it  is  released,  canceled  or
 44    discharged  by  the  director.  The provisions of this chapter that apply to a
 45    bond required pursuant to this chapter apply to each certificate of deposit or
 46    irrevocable letter of credit given in lieu of such bond.  The  certificate  of
 47    deposit  or irrevocable letter of credit shall remain on file with the depart-
 48    ment until it is released, canceled, or discharged by the director,  or  until
 49    the  director is notified ninety (90) days in advance, by registered or certi-
 50    fied mail, return receipt requested, that the certificate of deposit or irrev-
 51    ocable letter of credit is renewed, canceled  or amended.  Failure  to  notify
 52    the  director  may  result  in  the  suspension or revocation of the commodity
 53    dealer's license. Under the provisions of this chapter, an irrevocable  letter

                                       9

  1    of  credit or certificate of deposit shall not be accepted unless it is issued
  2    by a national bank or federal thrift institution in Idaho or by a  state-char-
  3    tered  bank  or thrift institution authorized to conduct business in Idaho and
  4    insured by the federal deposit insurance corporation. A certificate of deposit
  5    shall 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  to  be furnished for each commodity dealer shall be
  9    fixed at whichever of the following amounts is greater:
 10        (1)  The combined total indebtedness paid and owed to producers for  agri-
 11    cultural commodity and seed crop for the previous license year; or
 12        (2)  The indebtedness owed and estimated to be owed to producers for agri-
 13    cultural commodity and seed crop for the current license year.
 14        Subsequent  to  determining whichever of the preceding amounts is greater,
 15    and based on that amount, the amount of bond shall be calculated as follows:

 16    Gross Dollars:                     Amount of Bond:
 17    $0 - $450,000                      $20,000 bond or 6% of the gross
 18                                       dollars, whichever is less
 19    $450,001 - $1,000,000              $40,000 bond
 20    $1,000,001 - $8,000,000            $100,000 bond
 21    Over $8,000,000                    $500,000 bond

 22        In any case, the amount of the bond shall not be more  than  five  hundred
 23    thousand  dollars  ($500,000).  A surety shall notify the commodity dealer and
 24    the department by certified mail at least ninety (90) days prior to  the  can-
 25    cellation of a bond issued under the provisions of this chapter. The liability
 26    of  the  surety  shall cover purchases made by the commodity dealer during the
 27    time the bond is in force. A commodity dealer's bond filed with  this  depart-
 28    ment  shall  be continuous until canceled by the surety upon ninety (90) days'
 29    notice. The director reserves the right to waive the ninety (90) day cancella-
 30    tion period.
 31        If a commodity dealer is licensed pursuant to chapter 51, title 22,  Idaho
 32    Code,  that  same  commodity  dealer  may obtain a single bond, certificate of
 33    deposit or irrevocable letter of credit as a surety under chapter 5, title 69,
 34    Idaho Code, and chapter 51, title 22, Idaho Code. If a single  bond,  certifi-
 35    cate of deposit or irrevocable letter of credit is written covering chapter 5,
 36    title 69, Idaho Code, and chapter 51, title 22, Idaho Code, the bond, certifi-
 37    cate  of deposit or irrevocable letter of credit shall be made out in favor of
 38    the commodity indemnity fund and the seed indemnity fund. In the event a  com-
 39    modity dealer fails as defined in section 69-202(89), Idaho Code, and a single
 40    bond,  certificate  of  deposit  or irrevocable letter of credit is written in
 41    favor of the commodity indemnity fund and seed indemnity fund, the proceeds of
 42    the bond, certificate of deposit or irrevocable letter of credit will be allo-
 43    cated based on the dollar amount of the verified claims approved  pursuant  to
 44    chapter 2, title 69, Idaho Code, and chapter 51, title 22, Idaho Code.

Statement of Purpose / Fiscal Impact


                      STATEMENT OF PURPOSE

                           RS 17313C2

This legislation amends Section 69-202(2) increasing the minimum 
financial requirement to the definition of commodity dealer; 
Section 69-202 adding a definition for “credit sales contract”; 
Section 69-203(2) adds two classes of warehouse licenses; 
Section 69-206(6) adds clarity to maintaining current ratios and 
responsibility of warehouseman to report to ISDA if current 
ratio is not maintained at greater than a 1:1 ratio; Section 69-
206(7) establishes the minimum financial requirement for Class I 
and II Warehouse licenses.



                           FISCAL NOTE

No impact to the General Fund.




CONTACT
Name:	Lee Stacey
Agency:	Agriculture, Dept. of
Phone:	332-8670


STATEMENT OF PURPOSE/FISCAL NOTE	                  H 427