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PRINTER'S NO. 3077
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2564
Session of
2022
INTRODUCED BY D. WILLIAMS, FREEMAN, LONGIETTI, SAPPEY, GUENST,
O'NEAL, SANCHEZ, HOHENSTEIN, MADDEN, HENNESSEY AND PARKER,
MAY 2, 2022
REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS,
MAY 2, 2022
AN ACT
Amending Title 3 (Agriculture) of the Pennsylvania Consolidated
Statutes, providing for licensing and regulation of
agricultural commodity handlers; creating an Agricultural
Commodity Indemnity Fund; and providing for penalties and
enforcement.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 3 of the Pennsylvania Consolidated Statutes
is amended by adding a chapter to read:
CHAPTER 11
AGRICULTURAL COMMODITY HANDLING
Sec.
1101. Scope of chapter.
1102. Definitions.
1103. Requirement of handler's license and application.
1104. Issuance of license.
1105. Powers and duties of department.
1106. Refusal or suspension of handler's license.
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1107. Agricultural Commodity Indemnity Fund.
1108. Delayed price agreement.
1109. Filing claim upon handler's dishonor of demand.
1110. Lien on agricultural commodity assets of failed handler.
1111. Insolvent or discontinued handler.
1112. Handler recordkeeping and operational duties.
1113. Shortage of agricultural commodities.
1114. Payment deadline for sale of agricultural commodity.
1115. Disclosing lack of title or existence of lien.
1116. Penalties.
§ 1101. Scope of chapter.
This chapter relates to the licensing and regulation of
agricultural commodity handlers.
§ 1102. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Agricultural commodity." Corn, soybean, wheat, barley, oat,
milo or any other agricultural crop the secretary designates by
regulation. The term shall not include crops purchased as seed.
"Agricultural commodity assets." Any of the following
involving a failed handler:
(1) Agricultural commodities owned or stored, including
agricultural commodities in transit shipped by the licensed
handler but not yet paid for.
(2) Redeposited agricultural commodities.
(3) Proceeds from the sale of agricultural commodities
due or to become due to the depositor.
(4) Equity less any secured financing directly
associated with assets in hedging or speculative margin
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accounts held by commodity or security exchanges or dealers
representing the exchanges and any money due or to become due
less any secured financing directly associated with any
transactions on the exchanges.
(5) Subject to subparagraphs (i) and (ii), any other
unencumbered money, property or equity in funds or property,
wherever located, that can be directly traced to the sale of
an agricultural commodity by the handler. The following shall
apply:
(i) Money, property or equity in funds or property
shall not be considered encumbered unless the encumbrance
results from good and valuable considerations advanced by
any secured party on a good-faith basis.
(ii) The taking of money, property or equity in
funds or property as additional collateral for an
antecedent debt shall not be considered an encumbrance.
(6) Any other unencumbered money, property or equity in
assets.
(7) Voluntarily surrendering a license.
"Agricultural commodity handler." A person engaged in the
business of agricultural commodity handling.
"Agricultural commodity handling." Any of the following:
(1) Engaging in or participating in the business of
purchasing from depositors, for any reason, agricultural
commodities in excess of 10,000 bushels annually.
(2) Operating a warehouse as a bailee for the receiving,
storing, shipping or conditioning of an agricultural
commodity in excess of 5,000 bushels annually.
(3) Receiving into a warehouse an agricultural commodity
purchased under a delayed price agreement.
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(4) Providing a marketing function, including storage,
delayed price marketing, deferred payment, feed agreement or
any other marketing transaction where control is exerted over
the monetary proceeds of a depositor's agricultural commodity
by a person other than the depositor.
"Bailee." A person to whom an agricultural commodity is
delivered in trust for storage in a warehouse with title
remaining in the name of the depositor.
"Bailor." A person that delivers an agricultural commodity
to a bailee in trust for storage in a warehouse with title
remaining in the name of the depositor.
"Claimant." A person to whom a licensed handler owes a
financial obligation for agricultural commodities of the actual
monetary proceeds from agricultural commodities that have been
delivered to the handler.
"Deferred payment." The deferral of payment to a depositor
by a licensed handler for an agricultural commodity to which the
licensed handler has taken title to defer income of the
depositor from one tax year to another.
"Delayed price agreement." A written executory contract
executed by and between a licensed handler and a depositor that
covers the sale and transfer of title of an agricultural
commodity and provides in written terms the service charges and
method for pricing the commodity at a later date.
"Delayed price marketing." The sale and transfer of title of
an agricultural commodity with the price to be established at a
later date according to the terms of a delayed price agreement.
"Department." The Department of Agriculture of the
Commonwealth.
"Depositor." Any of the following:
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(1) A person that delivers an agricultural commodity to
a licensed handler for storage, conditioning, shipment or
sale.
(2) An owner or legal holder of a ticket or receipt
issued for an agricultural commodity who is a creditor of the
licensed handler for the value of the agricultural commodity.
"Failure" or "failed handler."
(1) Any of the following involving a licensed handler:
(i) An inability to satisfy a claimant financially.
(ii) A public declaration of insolvency.
(iii) A revocation, suspension or conditional
suspension of license with outstanding indebtedness to a
claimant.
(iv) Nonpayment in the ordinary course of business
where a good-faith dispute does not exist.
(v) Failure to file an application for license
renewal.
(vi) Denial of license renewal.
(2) As used in section 1112(b) (relating to handler
recordkeeping and operational duties), the term includes a
receiver, trustee or other custodian of an agricultural
commodity appointed for a licensed handler by a court of the
United States or this Commonwealth.
"Feed agreement." A written contract executed by and between
a licensed handler and a depositor who delivers an agricultural
commodity to the licensed handler for storage where the
following apply:
(1) The depositor transfers title to the agricultural
commodity to the licensed handler in exchange for a nominal
sum.
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(2) The depositor, upon delivery of the agricultural
commodity to the licensed handler, becomes a creditor of the
licensed handler due to the lien arising under section 1110
(relating to lien on agricultural commodity assets of failed
handler).
(3) All or part of the agricultural commodity is
returned to the depositor at a later date used for feed
purposes.
"Fund." The Agricultural Commodity Indemnity Fund.
"Licensed handler." A person required to obtain a license
under section 1103(a) (relating to requirement of handler's
license and application) to handle an agricultural commodity
within this Commonwealth.
"Receipt." A warehouse receipt issued by a licensed handler.
"Secretary." The Secretary of Agriculture of the
Commonwealth.
"Storage." The deposit of an agricultural commodity into a
warehouse, either for the account of the licensed handler
operating the warehouse or for the account of a depositor.
"Ticket." A scale weight ticket, a load slip or any
evidence, other than a receipt, given to a depositor by a
licensed handler upon delivery of an agricultural commodity to
the handler.
"Warehouse." A building, bin, protected enclosure or similar
premises used for receiving, storing, shipping or handling an
agricultural commodity.
§ 1103. Requirement of handler's license and application.
(a) License required.--
(1) Except as provided in paragraph (2), no person may
engage in agricultural commodity handling without first
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obtaining a handler's license.
(2) An agricultural commodity stored under a bailment
agreement in a warehouse operated by a person licensed under
the United States Warehouse Act (7 U.S.C. § 241 et seq.),
shall be exempt from sections 1107 (relating to Agricultural
Commodity Indemnity Fund), 1111(b) (relating to insolvent or
discontinued handler), 1112(b) (relating to handler
recordkeeping and operational duties) and 1113 (relating to
shortage of agricultural commodities). Each person licensed
under the United States Warehouse Act shall annually notify
the secretary in writing of its licensing and, if applicable,
if its license is suspended or terminated.
(b) License application.--
(1) Each person seeking to obtain or renew a handler's
license shall file an application annually with the secretary
at times and on forms and containing information as the
secretary prescribes, including, if applicable, the
appointment of a statutory agent under subsection (c).
(2) The secretary shall establish license fees to be
paid by a person engaged in agricultural commodity handling.
(3) The secretary shall approve or reject each
application for license within 15 days after receipt, if the
application is in proper form and contains the information
required under paragraph (1). A rejection of an application
shall be accompanied by a statement from the secretary of any
additional requirement necessary for licensure. The applicant
may resubmit the application without payment of any
additional fee.
(4) An application for renewal of a handler's license
shall be filed with the secretary no later than 30 days
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before the current license expires. An applicant who fails to
file a renewal application in time shall pay a late fee of $1
for each day the application is late, or $15, whichever is
greater. A renewal license shall not be issued until a late
fee that is due has been paid.
(5) The secretary may revoke or refuse to issue or renew
a handler's license if any of the following occurred within
five years before the application for the license or renewal
was filed:
(i) The applicant, the spouse of the applicant, a
manager employed by the applicant or other individual
materially involved in the agricultural commodity
handling business of the applicant was a principal in a
receivership or insolvency that resulted in losses to
creditors or to the fund.
(ii) The applicant pleaded guilty to or was
convicted of a felony or charge of embezzlement under the
laws of the United States, this Commonwealth or other
state.
(iii) The applicant made a delivery of commodities
not authorized under this chapter.
(iv) The applicant's license under the United States
Warehouse Act was revoked or canceled due to a violation
of that act.
(c) Statutory agent.--
(1) An applicant for a handler's license or renewal
issued under subsection (b) that does not conduct business at
an address in this Commonwealth at which the applicant
usually can be contacted shall include with the application a
written appointment of an agent upon whom any process, notice
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or demand may be served. The appointment shall be accompanied
by a written acceptance of the appointment signed by the
agent. The agent may be a natural person who is a resident of
this Commonwealth or a corporation whose principal place of
business is located in this Commonwealth. The appointment
shall be on forms and contain information as the secretary
prescribes. Failure to comply with this paragraph is grounds
for rejection of the application under subsection (b)(3).
(2) If an agent removes from the Commonwealth or
resigns, or if the applicant revokes the agent's appointment,
the applicant immediately shall notify the secretary in
writing no later than 30 days prior to the removal,
resignation or revocation. If an agent dies, the applicant
immediately shall notify the secretary in writing. Prior to
the removal, resignation or revocation, and no later than 30
days after the death of the agent, the applicant shall
appoint another agent and file with the secretary a written
appointment of the agent, along with a written acceptance of
the appointment signed by the agent.
(3) If the agent's address changes from that appearing
on the application, the applicant, no later than 30 days
prior to the address change, shall file with the secretary a
written statement setting forth the new address, along with
any other information the secretary requests.
(4) Failure to comply with paragraphs (2) and (3) is
grounds for suspension or conditional suspension of a
handler's license, without prior hearing, under section 1106.
§ 1104. Issuance of license.
(a) Issuance.--The secretary may issue a handler's license,
or renewal of it, upon the payment of the prescribed license
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fee, if the secretary is satisfied the applicant meets the
standards of financial responsibility under this section.
(b) Financial responsibility standards.--
(1) Each applicant for a handler's license, or renewal
of it, shall have and maintain current assets equal to or
greater than current liabilities and a total net worth
determined by the department.
(2) (i) A deficiency in required total net worth may be
compensated by any of the following:
(A) An indemnity agreement executed by a person
pledging personal assets for the benefit of commodity
creditors should the licensed handler default in the
licensed handler's obligations to the creditors.
(B) A bond issued by a corporate surety company
that is authorized to do business under the laws of
this Commonwealth.
(C) At the secretary's discretion, an
irrevocable letter of credit issued by a bank or
other lending institution that is authorized by this
Commonwealth or the United States to issue letters of
credit and is subject to service of process in this
Commonwealth for any suit on the bond or letter of
credit.
(ii) An indemnity agreement executed by a person
pledging personal assets shall be accompanied by
financial statements that reflect the person's financial
position as an individual and comply with the
requirements of subsection (c). A bond shall be made to
the State Treasurer to be deposited in the fund for the
benefit of any person who may be injured by the handler's
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failure to meet obligations arising under this chapter. A
letter of credit shall be issued for the benefit of the
department and the fund.
(c) Accounting.--
(1) To determine if an applicant meets the standards of
financial responsibility required under subsection (b), the
applicant for a handler's license, or renewal of a handler's
license, shall submit financial statements that have been
prepared in accordance with generally accepted accounting
principles and that have been audited or reviewed by an
independent certified public accountant. The financial
statements shall consist of all financial statements and
footnotes required by generally accepted accounting
principles as promulgated by the financial accounting
standards board together with the independent accountant's
report on the statements.
(2) The financial statements accompanying an applicant's
original application shall be for a year ending within six
months before the date of application. Afterward, the
applicant applying for renewal shall submit the financial
statements no later than 90 days after the end of the year
covered by the statements.
(3) The secretary may require an applicant for a
handler's license, or renewal of a handler's license, to
submit financial statements audited by an independent
certified public accountant if the department determines that
the financial statements initially submitted under this
subsection are incomplete or otherwise unsatisfactory.
§ 1105. Powers and duties of department.
The department has the following powers and duties:
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(1) To administer and enforce this chapter, including
the power to promulgate any regulation the department deems
necessary to carry out those duties.
(2) To inspect, or cause to be inspected, a warehouse or
premises suspected of being a warehouse at any reasonable
time.
(3) To require the filing of a report describing any
warehouse or operation of a warehouse.
(4) To petition, despite the existence of an adequate
remedy at law, a court of competent jurisdiction of the
United States or this Commonwealth to enforce compliance by a
licensed handler with this chapter, or any regulation adopted
by the secretary under it, by a special, preliminary or
permanent injunction, including an order against a person's
interference with the secretary in carrying out the powers
and duties under this chapter.
(5) To prescribe all forms, within the limitations
provided in this chapter, including receipts, tickets,
contracts, licenses, reports and license applications.
(6) To impound a receipt, ticket or any other record
when a licensed handler's license is under suspension.
§ 1106. Refusal or suspension of handler's license.
(a) License refusal or suspension.--The secretary, by order,
may refuse to grant or may suspend or conditionally suspend a
handler's license, without prior hearing, if the secretary
determines there is reasonable cause to believe that the
applicant or licensed handler:
(1) Has not maintained accurate and complete records and
accounts as required under section 1112(a) (relating to
handler recordkeeping and operational duties).
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(2) Has failed to charge, collect or remit the fee
required under section 1107(d) (relating to Agricultural
Commodity Indemnity Fund).
(3) Has refused to allow the secretary or the
secretary's designee to examine, at a reasonable time, the
applicant's or licensed handler's accounting records,
accounts, agricultural commodity inventories or warehouse.
(4) Does not possess sufficient agricultural commodities
to cover the outstanding receipts or tickets issued or
assumed by the applicant or licensed handler under bailment
agreements.
(5) Does not have the net assets specified in section
1104(b) (relating to issuance of license) or has not obtained
a bond or other protection for any deficiency in required net
assets as provided in that section.
(6) Does not have the obligations for agricultural
commodities purchased under delayed price agreements secured
or represented as required under section 1108 (relating to
delayed price agreement).
(7) Does not submit financial statements that comply
with the requirements of section 1104(c) within the
applicable time period specified in that subsection.
(8) Does not notify the secretary of a statutory agent's
change of address or of the death, removal, resignation or
revocation of the appointment of a statutory agent or does
not appoint another agent in accordance with section 1103(c)
(relating to requirement of handler's license and
application).
(b) Hearing.--The applicant or licensed handler to whom a
denial, suspension or conditional suspension order is issued
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shall be afforded a hearing in accordance with 2 Pa.C.S. Ch. 5
Subch. A (relating to practice and procedure of Commonwealth
agencies) after which the secretary shall issue or deny the
handler's license applied for in the pending application or
reinstate or revoke the suspended or conditionally suspended
license. The secretary may suspend, conditionally suspend or
revoke a handler's license after a hearing held in accordance
with the 2 Pa.C.S. Ch. 5 Subch. A for any other violation of
this chapter or any regulation adopted under it.
(c) Notice required.--The secretary shall cause a notice to
be posted on the property of a licensed handler whose license
has been suspended, conditionally suspended or revoked stating
the limitation or restriction imposed on the person in the
handling of an agricultural commodity due to the suspension,
conditional suspension or revocation. The notice shall not be
removed from the property without written authorization from the
secretary.
(d) Handler notice responsibility.--If a licensed handler's
license is revoked, the licensed handler immediately shall
notify, in a manner determined by the secretary, all parties
storing agricultural commodities in the licensed handler's
warehouse and all holders of receipts issued by the handler, if
known.
(e) Immunity.--If any court of competent jurisdiction issues
an order restraining, overturning or modifying an order of the
secretary that suspends, conditionally suspends or revokes a
licensed handler's license or that refuses to issue a licensed
handler's license, the department, its officers, employees,
agents and the fund shall be held harmless from liability or
financial obligations arising out of the operations of the
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licensed handler while operating under the court order.
§ 1107. Agricultural Commodity Indemnity Fund.
(a) Creation of fund.--A special fund to be known as the
Agricultural Commodity Indemnity Fund is created in the State
Treasury. The Commonwealth shall not be held liable for any
claim presented against the fund under section 1109 (relating to
filing claim upon handler's dishonor of demand).
(b) Funding sources.--The fund shall consist of a per-bushel
fee remitted under subsection (d), agricultural commodity
handler license fees under section 1103(b) (relating to
requirement of handler's license and application), a sum that
the secretary may collect by any legal action on behalf of the
fund and any property or security acquired through the use of
money in the fund.
(c) Use.--The money in the fund shall be used exclusively to
indemnify a depositor as provided in section 1109 and to pay
examination, inspection, administrative and enforcement costs of
this chapter.
(d) Remittance.--A licensed handler shall remit the fee
determined by the secretary under subsection (g) on any of the
following:
(1) Agricultural commodities delivered to the licensed
handler for storage under a bailment agreement.
(2) Agricultural commodities delivered to the licensed
handler for first sale.
(3) Any other circumstance determined by the secretary,
as issued under a regulation.
(e) Procedure for recruiting and remittance.--A licensed
handler shall account for and remit money under subsection (d)
to the secretary in the manner and form as the secretary shall
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prescribe by regulation.
(f) Disbursements.--Disbursements from the fund shall be
paid by the State Treasurer under a voucher authorized by the
secretary.
(g) Fee adjustment or waiver.--
(1) The secretary shall annually review the debits of
and credits to the fund and shall make any adjustment in the
fee necessary to maintain the fund within the limits
established under this section, but the fee may not exceed
$0.005 per bushel on any agricultural commodity on which the
fee is to be paid. No later than March 1 of each year, the
secretary shall determine the proposed amount of the fee
based on the expected volume of agricultural commodities on
which the fee is to be collected and that are likely to be
handled under this chapter. The fee shall become effective on
June 1, 2022, and each June 1 thereafter.
(2) Fund balance limits for fee imposition.--
(i) If, at the end of any calendar year, the fund
balance exceeds $10,000,000, less any encumbered
balances, pending or unsettled claims and handler license
fees under section 1103(b), the fee required under
subsection (d) shall be waived until the secretary
reinstates the fee to maintain the liquidity of the fund
as provided in subparagraph (ii).
(ii) If, at any time, the secretary determines that
the fund balance, less any encumbered balances, pending
or unsettled claims and handler license fees under
section 1103(b), is less than $8,000,000, the secretary
may reinstate the fee required under subsection (d). If
the secretary reinstates the fee, the secretary shall
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notify all licensed handlers to begin collecting the fee
no later than 90 days after notification.
§ 1108. Delayed price agreement.
(a) Execution of agreement.--A delayed price agreement shall
be executed between the licensed handler and the depositor, or
by their authorized representative, no later than 15 days after
the first delivery of an agricultural commodity is received for
delayed pricing under the agreement.
(b) Maintenance of commodity required.--Subject to the lien
that attaches under section 1110 (relating to lien on
agricultural commodity assets of failed handler), a licensed
handler who purchases an agricultural commodity under a delayed
price agreement shall, at all times, maintain the commodity,
rights in the commodity, proceeds from the sale of the
commodity, or a combination of the commodity, rights and
proceeds, equal to at least 90% of the value of the licensed
handler's obligation for all commodities that the licensed
handler has purchased that are not priced under delayed price
agreements. The obligation shall be secured or represented by
means determined by the secretary.
§ 1109. Filing claim upon handler's dishonor of demand.
(a) Claim.--If a depositor makes a demand for settlement of
an obligation concerning an agricultural commodity on which a
fee was required to be remitted under section 1107 (relating to
Agricultural Commodity Indemnity Fund) and the licensed handler
is experiencing failure, the depositor, after providing the
secretary or the secretary's designee with evidence of the
depositor's demand and the dishonoring of that demand, may file
a claim with the secretary no later than six months after
dishonor of the demand for indemnification from the fund, to be
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measured as follows:
(1) The department shall establish the dollar value of
the loss incurred by a depositor holding a receipt or a
ticket for an agricultural commodity on which a fee was
required and that the depositor delivered to the licensed
handler under a delayed price agreement, bailment agreement
or feed agreement, or that the depositor delivered to the
licensed handler before delivery was due under a contract or
other agreement between the depositor and licensed handler.
The value shall be based on the fair market price being paid
to depositors by licensed handlers for the commodities on the
date on which the department received notice that the receipt
or ticket was dishonored by the licensed handler. A depositor
filing a claim under this subsection shall be bound by the
value determined by the department.
(2) The dollar value of the loss incurred by a depositor
who has sold or delivered for sale an agricultural commodity
on which a fee was required and who is a creditor of the
licensed handler for all or a part of the value of the
commodity shall be based on the amount stated on the
obligation on the date of the sale.
(b) Liability.--The fund shall be liable to a depositor for
money owed to the depositor for an agricultural commodity
deposited with a licensed handler under a transaction for which
the handler must remit a fee under section 1107(d) and that is
not recovered through other legal and equitable remedies as
follows:
(1) The liability of the fund shall equal 100% of the
depositor's loss, as determined under subsection (a)(1) and
(2), if any of the following apply:
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(i) The agricultural commodity was stored with the
licensed handler under a bailment agreement.
(ii) Payment for the agricultural commodity was
tendered by the handler and subsequently dishonored, such
as payment by a check for which there were insufficient
funds or by a check that was written on an account that
was frozen by the financial institution.
(iii) The agricultural commodity was priced at the
time of delivery to the licensed handler, the delivery
occurred no more than 30 days prior to the secretary's
suspension of the licensed handler's license under
section 1106(a)(4), (6) or (7) (relating to refusal or
suspension of handler's license), and the handler failed
to pay for the agricultural commodity on or before the
date on which the suspension occurred.
(iv) The agricultural commodity was priced at the
time of delivery to the licensed handler, the delivery
occurred no more than 90 days prior to the secretary's
suspension of the licensed handler's license under
section 1106(a)(4), (6) or (7), the agricultural
commodity was subject to a written agreement for deferred
payment by the handler no later than 90 days following
the date of delivery and the licensed handler failed to
pay for the agricultural commodity on or before the
payment date established in the written agreement.
(2) If the deposit of agricultural commodity that was
the subject of the depositor's loss involves a circumstance
other than those described in paragraph (1), the liability of
the fund shall equal 100% of the first $10,000 of the loss
and 80% of the remaining dollar value of that loss as
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determined under subsection (a)(1) and (2).
(3) Notwithstanding paragraphs (1) and (2), the
aggregate amount recovered by a depositor under all remedies
shall not exceed 100% of the value of the depositor's loss.
If the money recovered by a depositor under all remedies
exceeds 100% of the value of the depositor's loss, the
depositor shall reimburse the fund in the amount that exceeds
the value of that loss.
(c) Determination.--The secretary or the secretary's
designee shall determine the validity of any claim presented
against the fund. A claim filed under this section for losses on
an agricultural commodity other than an agricultural commodity
stored under a bailment agreement shall not be valid unless the
depositor has made a demand for settlement of the obligation
within 12 months after the agricultural commodity is priced. A
depositor whose claim has been refused by the secretary may
appeal the refusal either to the Court of Common Pleas of
Dauphin County or the court of common pleas of the county in
which the depositor resides. The secretary shall provide for
payment from the fund to a depositor whose claim has been found
to be valid.
(d) Lack of sufficient assets.--If, at any time, the fund
does not contain sufficient assets to pay valid claims, the
secretary shall hold those claims for payment until the fund
again contains sufficient assets. Claims against the fund shall
be paid in the order in which the claims are presented and found
to be valid.
(e) Depositor action.--If a depositor files an action for a
legal or equitable remedy in a Federal or State court having
jurisdiction in those matters that includes a claim against an
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agricultural commodity upon which the depositor may file a claim
against the fund at a later date, the depositor also shall file
with the secretary a copy of the action filed with the court.
The following shall apply to claims against the fund filed under
this subsection:
(1) In the event of payment of a loss, the secretary
shall be subrogated to the extent of the amount of payments
to all rights, powers, privileges and remedies of the
depositor against any person regarding the loss.
(2) The depositor shall render all necessary assistance
to aid the secretary in securing the rights granted in this
section. An action or claim initiated by the depositor and
pending at the time of payment from the fund may not be
compromised or settled without the consent of the secretary.
§ 1110. Lien on agricultural commodity assets of failed
handler.
(a) Parties.--A lien shall exist on all agricultural
commodity assets of a licensed handler in favor of a claimant:
(1) Including a lender, who possesses a receipt covering
an agricultural commodity owned or stored by the licensed
handler.
(2) Who possesses written evidence of ownership, other
than a receipt, disclosing a storage obligation of the
handler, including a ticket.
(3) Who surrendered a receipt as part of an agricultural
commodity sales transaction but was not paid fully for the
agricultural commodity and the handler failed within 21 days
after the surrender.
(4) Who possesses any other written evidence of the sale
of an agricultural commodity to the licensed handler for
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which they were not paid fully, including the sale of an
agricultural commodity for a nominal sum under a feed
agreement.
(b) Attachment.--The lien that secures all claims described
in subsection (c) shall arise, attach to the agricultural
commodity assets of a licensed handler and take effect at the
time of delivery of the agricultural commodity for sale or for
storage under a bailment agreement, commencement of the storage
obligation or when money is advanced by the lender. The lien
shall terminate when the liability of the licensed handler to
the claimant is discharged on the condition that the priority of
each lien among the respective claimants shall not relate to the
date the claim arises but shall be governed by the priorities
established in subsection (c). If a failure occurs, the lien
claims of all claimants shall be considered assigned by
operation of this section to the department. If a failure and
subsequent litigation occurs, the lien shall transfer over to
assets or proceeds, or assets either received or liquidated by
the department. The lien established under this section shall
have priority over all competing lien claims asserted against
the agricultural commodity assets.
(c) Exclusive authority to enforce.--Except as provided in
subsection (d), if a failure occurs, the secretary shall possess
exclusive authority to enforce the lien claims and allocate the
proceeds as follows:
(1) First priority against all agricultural commodity
assets shall be a claimant:
(i) Including a lender, who possesses a receipt
covering an agricultural commodity owned or stored by the
licensed handler.
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(ii) Who possesses written evidence of ownership,
other than a receipt, disclosing a storage obligation of
the licensed handler, including a ticket.
(iii) Who surrenders a receipt as part of an
agricultural commodity transaction but was not fully paid
for the agricultural commodity, and the licensed handler
failed within 21 days after the surrender.
(2) Second priority against all agricultural commodity
assets shall be to a claimant who possesses written evidence
of the sale of an agricultural commodity, including, but not
limited to, a ticket, delayed price agreement or similar
agricultural commodity delivery contract where delivery and
pricing was completed within 30 days prior to a licensed
handler's failure.
(3) To the extent not necessary to satisfy a first and
second priority claimant, any other claimant who possesses
written evidence of the sale of an agricultural commodity to
the licensed handler shall participate in the pro rata
distribution of the remainder of the agricultural assets in
an amount not to exceed the value of each claim.
(d) Adversary proceedings.--If any adversary proceeding is
commenced to recover agricultural commodity assets upon which
the lien imposed in this section is imposed and the department
declines to enter the proceeding, the secretary, upon
application to the secretary by a claimant, shall assign to the
claimant the applicable lien to permit the claimant to pursue
the claimant's lien in the adversary proceeding to the extent
the action will not delay the resolution of the proceeding, the
prompt liquidation of the assets or the ultimate distribution of
the assets to all claimants.
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§ 1111. Insolvent or discontinued handler.
(a) Prohibition.--Except in payment of or as security for an
existing debt, a licensed handler who is insolvent may not
accept a deposit of an agricultural commodity.
(b) Notification of expiration or cancellation.--A licensed
handler who intends to discontinue its operations at the
expiration of the licensed handler's license or at any other
time shall, at least 30 days prior to the date of the expiration
or cancellation of its license, notify the secretary, all
parties storing an agricultural commodity in the licensed
handler's warehouse and all holders of receipts issued by the
licensed handler, if known. If all holders of receipts are not
known, the licensed handler shall advertise its intention by
public notice in a newspaper of general circulation in the place
in which the warehouse is situated or, if no newspaper is
published in that place, in a newspaper of general circulation
in the county in which the warehouse is situated. The owners or
depositors of the agricultural commodities shall remove, or
cause to be removed, the agricultural commodities from the
warehouse before the expiration or cancellation of the license.
If for any reason the agricultural commodities are not removed
from the warehouse, the licensed handler shall sell them for the
account of the depositors in accordance with regulations
promulgated by the secretary.
§ 1112. Handler recordkeeping and operational duties.
(a) Maintenance and records.--
(1) Each licensed handler shall keep in a place of
safety complete and correct records and accounts of:
(i) Agricultural commodities received in and
withdrawn from the licensed handler's warehouse.
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(ii) Receipts and tickets issued by the licensed
handler.
(iii) Receipts and tickets returned to and canceled
by the licensed handler.
(2) The records and accounts required under paragraph
(1) shall be retained by the licensed handler for a period
prescribed by the secretary and copies of receipts or other
documents evidencing ownership of an agricultural commodity
or liability as a licensed handler shall be retained so long
as the documents are outstanding. A document that has been
canceled shall be retained for a period of not less than
three years from the date of cancellation.
(3) All records and accounts required under this section
shall be kept separate and distinct from records and accounts
of other business and shall be subject to inspection by the
secretary or the secretary's designee at all reasonable
times.
(4) The secretary may examine, or cause to be examined
at any reasonable time, the records and accounts,
agricultural commodity inventory or warehouse of a licensed
handler, applicant for a licensed handler's license or
unlicensed person suspected of being an agricultural
commodity handler. If the secretary or the secretary's
designee is unable to conduct or complete an examination of a
licensed handler's records, inventory or warehouse due to
inadequate, incomplete or noncurrent records, as required
under this chapter and any regulation adopted under it, the
secretary or the secretary's designee may assess a charge
against the licensed handler for necessary expenses incurred
or required by the secretary or the secretary's designee to
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complete the examination. The charge shall become a claim of
the Commonwealth.
(5) Each licensed handler shall keep separate records
and accounts of all agricultural commodities that are
delivered to the licensed handler for storage under bailment
agreements and shall not include those agricultural
commodities in any accounting or computation of the licensed
handler's assets.
(b) Duty of care.--Each licensed handler shall, at all
times, including any period of suspension of the licensed
handler's license, exercise the care in regard to an
agricultural commodity in its custody as a bailee as a
reasonably prudent owner would exercise under the same
circumstance and condition. A licensed handler committing an
action or neglect, the effect of which is to depreciate the
value of an agricultural commodity stored under a bailment
agreement in a warehouse under the handler's control, shall be
liable to the depositor damaged by its action or neglect.
§ 1113. Shortage of agricultural commodities.
If the secretary determines that a licensed handler does not
have in its possession sufficient agricultural commodities to
cover the outstanding receipts and tickets issued or assumed
under a bailment agreement, or if the licensed handler refuses
to submit records or property to lawful inspection as provided
under this chapter, the secretary may give notice requiring the
licensed handler to do any of the following:
(1) Cover the shortage.
(2) Furnish bond as required by the secretary.
(3) Submit to inspection as the secretary considers
necessary.
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§ 1114. Payment deadline for sale of agricultural commodity.
(a) Payment required.--Except as provided in subsection (b),
a licensed handler shall tender payment to a depositor or a
depositor's agent within 14 days of the sale of an agricultural
commodity.
(b) Exception.--Subsection (a) shall not apply to any of the
following:
(1) A written agreement providing a different payment
deadline.
(2) A delayed price agreement.
(3) A deferred payment agreement.
(4) Any other circumstance determined by the secretary,
as issued under a regulation.
§ 1115. Disclosing lack of title or existence of lien.
No person shall knowingly deposit an agricultural commodity
to which the person does not have title or upon which there is a
lien or mortgage, either for sale or for storage under a
bailment agreement, without disclosing the lack of title or the
existence of the lien or mortgage.
§ 1116. Penalties.
(a) Failure to obtain handler's license.--
(1) Except as provided in paragraph (2), a violation of
section 1103(a) (relating to requirement of handler's license
and application) shall constitute a summary offense for a
first offense and a misdemeanor of the third degree for each
subsequent offense. Upon conviction of a first offense, a
person may be imprisoned for no more than 90 days and be
fined no more $1,000. Upon conviction of a subsequent
offense, a person may be imprisoned for no more than one year
and be fined no more than $2,500.
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(2) A person who violates section 1103(a) and who is
insolvent and financially unable to satisfy a claimant
commits the following offenses:
(i) If the financial obligation owed by the offender
to the claimant is $1,000 or more but less than $7,500,
the person is guilty of a misdemeanor of the second
degree. Upon conviction of an offense under this
subparagraph, an individual may be imprisoned for no more
than two years and be fined no more than $5,000.
(ii) If the financial obligation is $7,500 or more
but less than $150,000, the person is guilty of a
misdemeanor of the first degree. Upon conviction of an
offense under this subparagraph, an individual may be
imprisoned for no more than five years and be fined no
more than $10,000.
(iii) If the financial obligation is $150,000 or
more, the person is guilty of a felony of the third
degree. Upon conviction of an offense under this
subparagraph, an individual may be imprisoned for no more
than seven years and be fined no more than $15,000.
(b) Violation relating to delayed price agreements,
insolvency and disclosures.--A violation of section 1108(b)
(relating to delayed price agreement), 1111(a) (relating to
insolvent or discontinued handler) or 1115(a) (relating to
disclosing lack of title or existence of lien) shall constitute
a misdemeanor of the first degree. Upon conviction of an offense
under this subsection, an individual may be imprisoned for no
more than five years and be fined no more than $10,000.
(c) Violations relating to records and accounts.--A licensed
handler who keeps false records and accounts in violation of
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section 1112(a)(3) (relating to handler recordkeeping and
operational duties) commits the offense of tampering with
records or identification under 18 Pa.C.S. § 4104(a) (relating
to tampering with records or identification).
(d) Violations relating to payment deadlines.--A violation
of section 1114(a) (relating to payment deadline for sale of
agricultural commodity) shall constitute a summary offense for a
first offense and a misdemeanor of the third degree for each
subsequent offense. Upon conviction of a first offense, an
individual may be imprisoned for no more than 90 days and be
fined no more $1,000. Upon conviction of a subsequent offense,
an individual may be imprisoned for no more than one year and be
fined no more than $2,500.
Section 2. This act shall take effect in 120 days.
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