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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3762 Introduced in House (IH)]

104th CONGRESS
  2d Session
                                H. R. 3762

    To assure payment to dairy and livestock producers for milk and 
 livestock delivered to milk processors, livestock dealers, or market 
                               agencies.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              July 9, 1996

 Mr. Gunderson (for himself, Mr. Roberts, Mr. Johnson of South Dakota, 
and Mr. Thornton) introduced the following bill; which was referred to 
                      the Committee on Agriculture

_______________________________________________________________________

                                 A BILL

 
    To assure payment to dairy and livestock producers for milk and 
 livestock delivered to milk processors, livestock dealers, or market 
                               agencies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Dairy and 
Livestock Producer Protection Act of 1996''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
             TITLE I--DAIRY INDUSTRY SECURITY RESERVE FUND

Sec. 101. Definitions.
Sec. 102. Establishment of Dairy Industry Security Reserve Fund.
Sec. 103. Establishment of Board of Trustees for Dairy Industry 
                            Security Reserve Fund.
Sec. 104. Collection of assessments from milk handlers to fund Reserve 
                            Fund.
Sec. 105. Submission and payment of claims of milk producers for 
                            nonpayment for milk shipments.
Sec. 106. Preemption of State or local payment security programs.
            TITLE II--STATUTORY TRUST FOR LIVESTOCK SELLERS

Sec. 201. Establishment of statutory trust for benefit of sellers of 
                            livestock to dealers and market agencies.

             TITLE I--DAIRY INDUSTRY SECURITY RESERVE FUND

SEC. 101. DEFINITIONS.

    For purposes of this title:
            (1) Board.--The term ``Board'' means the Board of Trustees 
        established under section 103 to administer the Dairy Industry 
        Security Reserve Fund.
            (2) Milk.--The term ``milk'' means cow's milk produced in 
        the 48 contiguous States.
            (3) Milk handler.--The term ``milk handler'' means a person 
        who receives or otherwise acquires milk in commerce before 
        processing or who first processes milk for the purpose of 
        marketing commercially milk or milk products.
            (4) Milk producer.--The term ``milk producer'' means a 
        person who produces milk in the 48 contiguous States and 
        markets such milk for commercial use.
            (5) Process.--The term ``process'' includes the 
        pasteurization, clarification, or separation of milk or the 
        addition of other ingredients or products to milk, except that 
        such term does not include simply the cooling of milk or the 
        commingling of milk with other milk.
            (6) Reserve fund.--The term ``Reserve Fund'' means the 
        Dairy Industry Security Reserve Fund established under section 
        102.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.

SEC. 102. ESTABLISHMENT OF DAIRY INDUSTRY SECURITY RESERVE FUND.

    (a) Establishment.--There is hereby established in the Department 
of Agriculture a fund to be known as the ``Dairy Industry Security 
Reserve Fund''. Monies in the Reserve Fund shall be available only for 
the use of the Board.
    (b) Contents of Reserve Fund.--The Reserve Fund shall consist of 
the following:
            (1) Amounts collected as assessments under section 104.
            (2) Amounts collected by States before the date of the 
        enactment of this Act and paid to the Reserve Fund on behalf of 
        milk handlers subject to assessments.
            (3) Amounts borrowed by the Board.
            (4) Interest from investments made under subsection (d).
    (c) Use of Reserve Fund.--The Board may use monies in the Reserve 
Fund to pay--
            (1) subject to section 103(f), the expenses incurred by the 
        Secretary or the Board in administering this title; and
            (2) the claims of milk producers for milk shipped by the 
        producers for which payment is not made on account of the 
        bankruptcy under title 11, United States Code, of a milk 
        handler.
    (d) Investment Authority.--The Board may invest monies in the 
Reserve Fund in general obligations of the United States, in general 
obligations of a State or political subdivision of a State, in any 
interest bearing account or certificate of deposit of a bank that is a 
member of the Federal Reserve System, or in obligations fully 
guaranteed as to principle and interest by the United States. The 
Secretary shall provide guidelines to the Board for the exercise of 
this investment authority.
    (e) Borrowing Authority.--The Board may borrow money for deposit 
into the Reserve Fund if the Board determines that amounts in the 
Reserve Fund are insufficient to satisfy approved claims.

SEC. 103. ESTABLISHMENT OF BOARD OF TRUSTEES FOR DAIRY INDUSTRY 
              SECURITY RESERVE FUND.

    (a) Establishment.--There is hereby established a Board of Trustees 
to administer the Dairy Industry Security Reserve Fund, set and collect 
assessments under section 104 to provide funds for the Reserve Fund, 
pay claims made against the Reserve Fund, and perform such other duties 
as may be assigned to the Board by this title or the Secretary.
    (b) Membership.--
            (1) Appointment of members.--The Board shall consist of 
        nine members appointed by the Secretary as follows:
                    (A) One member selected from among milk producers 
                whose farms are located in Region I.
                    (B) One member selected from among milk producers 
                whose farms are located in Region II.
                    (C) One member selected from among milk producers 
                whose farms are located in Region III.
                    (D) One member selected from among the officers or 
                employees of milk handlers that are subject to the 
                assessment under section 104 and the principal place of 
                business of which is Region I.
                    (E) One member selected from among the officers or 
                employees of milk handlers that are subject to the 
                assessment under section 104 and the principal place of 
                business of which is Region II.
                    (F) One member selected from among the officers or 
                employees of milk handlers that are subject to the 
                assessment under section 104 and the principal place of 
                business of which is Region III.
                    (G) Three members selected from among persons who 
                are experts in financial investment or the staffing or 
                administration of relevant Federal programs, as 
                designated by the Secretary before the first 
                solicitation of nominees under subsection (c).
            (2) Regional distribution.--For purposes of making regional 
        appointments of members of the Board under paragraph (1), the 
        48 contiguous States shall be grouped into three regions as 
        follows:
                    (A) Region I: Alabama, Arkansas, Connecticut, 
                Delaware, Florida, Georgia, Indiana, Kentucky, 
                Louisiana, Maine, Maryland, Massachusetts, Mississippi, 
                New Hampshire, New Jersey, New York, North Carolina, 
                Ohio, Pennsylvania, Rhode Island, South Carolina, 
                Tennessee, Texas, Vermont, Virginia, and West Virginia.
                    (B) Region II: Illinois, Iowa, Michigan, Minnesota, 
                Missouri, North Dakota, South Dakota, and Wisconsin.
                    (C) Region III: Arizona, California, Colorado, 
                Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, 
                Oklahoma, Oregon, Utah, Washington, and Wyoming.
            (3) Terms of members; vacancies.--Each member of the Board 
        shall serve for a three-year term, except that the Secretary 
        may stagger the terms of the initial members of the Board. A 
        vacancy on the Board shall be filled in the manner in which the 
        original appointment is required to be made.
            (4) Compensation.--Members of the Board shall serve without 
        pay, but shall receive a per diem for each day during which 
        they are engaged in the actual performance of services on 
        behalf of the Board and shall be reimbursed for expenses 
        incurred in their service on the Board, including reasonable 
        travel costs and out-of-pocket expenses when required to be 
        away from their home or place of business in the service of the 
        Board.
            (5) Removal for cause.--The Secretary may remove any member 
        of the Board for good cause shown.
    (c) Nomination Process.--
            (1) Appointment from nominees.--The Secretary shall appoint 
        the members specified under subsection (b)(1) from nominees 
        submitted pursuant to paragraph (2).
            (2) Solicitation of nominees.--The Secretary shall begin 
        the process of filling a particular position on the Board by 
        soliciting the names of persons who are qualified to serve as a 
        member of the Board in that position. The Secretary shall 
        accept recommendations from persons who are qualified to serve 
        as a member of the Board in that position or from organizations 
        composed of such persons. The Secretary shall be the final 
        judge of the qualifications of persons to submit 
        recommendations or to serve on the Board.
            (3) Lack of nominees.--If nominees are not submitted 
        pursuant to paragraph (2) for a particular position on the 
        Board, the Secretary may make the appointment in such other 
manner as the Secretary may prescribe.
    (d) Board Procedures.--
            (1) Meetings of the board.--Within two months after the 
        Secretary has appointed the initial Board, the Board shall 
        convene for its initial meeting and elect officers and adopt 
        written bylaws and rules of procedure to govern its meetings. 
        Following the initial meeting, the Board shall meet at the call 
        of the chairperson or as requested by the Secretary, but at 
        least once every six months.
            (2) Quorum.--A quorum of the Board shall be five members.
            (3) Notice to secretary; ex officio representation.--The 
        Board shall notify the Secretary in advance of each meeting of 
        the Board. The Secretary, or a representative of the Secretary, 
        may attend each meeting as a nonvoting ex officio member of the 
        Board.
            (4) Chairperson.--The members of the Board shall select one 
        of the members to serve as the chairperson of the Board. The 
        chairperson shall serve a one year term of office.
    (e) Staff.--The Board may employ or contract with outside entities 
for such persons as the Board considers to be necessary to assist the 
Board to perform its duties under this title. The Board shall define 
the duties of such persons in service to the Board and fix the 
compensation of such persons. At the request of the Board, the 
Secretary may assign, on a reimbursable basis, employees of the 
Department of Agriculture to assist the Board.
    (f) Administrative Expenses.--
            (1) In general.--The Board may incur and pay for 
        administrative and other expenses related to the duties of the 
        Board under this title.
            (2) Limitation.--Expenses incurred or paid by the Board 
        during a fiscal year may not exceed two percent of the total 
        amount in the Reserve Fund at the beginning of that fiscal 
        year. The Secretary may waive this limitation for fiscal years 
        before the Reserve Fund reaches the maximum capital 
        contribution level specified in section 104.
            (3) Reimbursement of government costs.--As one of the 
        administrative expenses of the Board, the Board shall reimburse 
        the Secretary for all costs incurred by the Secretary--
                    (A) to assist the Board in administering the 
                Reserve Fund or in carrying out this title; and
                    (B) in performing oversight of Board activities.
    (g) General Powers of the Board.--
            (1) Bylaws and rules.--The Board may adopt bylaws and issue 
        rules and regulations governing the manner in which its 
        business may be conducted and the powers vested in it may be 
        exercised.
            (2) Suits.--The Board may sue and be sued, complain and 
        defend, in any court of law or equity, State or Federal. All 
        suits of a civil nature at common law or in equity to which the 
        Board shall be a party shall be deemed to arise under the laws 
        of the United States, and the United States district courts 
        shall have original jurisdiction thereof, without regard to the 
        amount in controversy, and the Board, in any capacity, without 
        bond or security, may remove any such action, suit, or 
        proceeding from a State court to the United States district 
        court for the district or division embracing the place where 
        the same is pending by following any procedure for removal then 
        in effect.
            (3) Intervention.--Upon timely application, the Board may 
        raise and may appear and be heard on any issue in a bankruptcy 
        case under title 11, United States Code, in which a milk 
        handler is the debtor.
            (4) Contract authority.--The Board may enter into contracts 
        and agreements as necessary in the conduct of its activities 
        under this title.
            (5) Miscellaneous authorities.--The Board may exercise such 
        other powers incidental to its performance of functions 
        required or authorized for it under this title.
    (h) Reports.--The Board shall submit an annual report to the 
Secretary and Congress describing the activities of the Board during 
the preceding fiscal year, expenditures from the Reserve Fund during 
that fiscal year, and the balance of the Reserve Fund at the end of 
that fiscal year and containing an estimate of anticipated expenditures 
from the Reserve Fund during the fiscal year in which the report is 
submitted.

SEC. 104. COLLECTION OF ASSESSMENTS FROM MILK HANDLERS TO FUND RESERVE 
              FUND.

    (a) Imposition of Assessment.--The Secretary shall require by order 
that each milk handler shall pay an assessment on all milk acquired by 
the milk handler and marketed for commercial use. In lieu of collecting 
an assessment from milk handlers in a State, the Board may accept 
payments from the State that--
            (1) were collected before the date of the enactment of this 
        title; and
            (2) are paid on behalf of milk handlers in amounts 
        sufficient to cover the amounts that would be otherwise due 
        from the milk handlers.
    (b) Exceptions.--
            (1) Noncommercial public handlers.--The Board may exempt 
        from paying an assessment those milk handlers that are 
        noncommercial public users of milk, such as the Armed Forces, 
        prisons, and schools.
            (2) Handlers who are also producers.--A milk handler that 
        is also a milk producer shall not be subject to an assessment 
        if the milk handler only markets milk that is the handler's own 
        production and such milk is produced through a single farming 
        operation. In light of this exception, a milk handler that 
        fails to pay an assessment may not submit a claim as a milk 
        producer under section 105 for losses related to the handler's 
        bankruptcy.
    (c) Amount of Assessment.--The rate of assessment shall be 
established by the Board, except that the rate may not exceed two cents 
per hundredweight of milk.
    (d) Suspension of Assessments.--
            (1) Suspension required.--The Board shall suspend the 
        collection of assessments under this section whenever the 
        unobligated balance in the Reserve Fund reaches $30,000,000.
            (2) Refund of excess assessments.--If the unobligated 
        balance in the Reserve Fund exceeds $30,000,000 for three 
        consecutive years, the Secretary shall refund the amount in 
        excess of $30,000,000 to all milk handlers that are in 
        operation as of the date the refund is declared and from which 
        assessments were collected at any time.
            (3) Amount of refund.--The amount to be paid as a refund to 
        a milk handler referred to in paragraph (2) shall bear the same 
        ratio to the total amount to be refunded as--
                    (A) the total amount of assessments that would have 
                been collected from that milk handler during the 12-
                month period preceding the refund, if not for the 
                suspension of assessments under paragraph (1); bears
                    (B) to the total amount of assessments that would 
                have been so collected during that period from all milk 
                handlers referred to in paragraph (2).
    (e) Collection and Enforcement.--
            (1) Collection.--Assessments under this section shall be 
        collected and remitted on a monthly basis to the Board for 
        deposit in the Reserve Fund. The Secretary shall issue an order 
        prescribing the manner in which assessments are to be collected 
        and remitted. The Secretary shall oversee the collection of 
        assessments using the audit system provided under Federal milk 
        marketing orders issued under section 8c of the Agricultural 
        Adjustment Act (7 U.S.C. 608c), reenacted with amendments by 
        the Agricultural Marketing Agreement Act of 1937.
            (2) Penalties.--If a milk handler fails to remit the 
        assessments required under this section or fails to comply with 
        such requirements for recordkeeping or otherwise as are 
        required by the Board to carry out this section, the milk 
        handler shall be liable to the Secretary for a civil penalty in 
        an amount that is--
                    (A) in the case of an unintentional violation, not 
                less than $500 but not more than $5,000; and
                    (B) in the case of an intentional violation, not 
                less than $10,000 but not more than $100,000.
            (3) Enforcement.--The Secretary may enforce this section in 
        the courts of the United States.
    (f) No Effect on Producer Prices.--Assessments collected under this 
section shall not--
            (1) reduce the prices paid under the Federal milk marketing 
        orders issued under section 8c of the Agricultural Adjustment 
        Act (7 U.S.C. 608c), reenacted with amendments by the 
        Agricultural Marketing Agreement Act of 1937; or
            (2) be deducted from the amounts that milk handlers must 
        pay to milk producers for milk sold to a milk handler.

SEC. 105. SUBMISSION AND PAYMENT OF CLAIMS OF MILK PRODUCERS FOR 
              NONPAYMENT FOR MILK SHIPMENTS.

    (a) Board Determination of Eligibility.--The Board shall determine 
the eligibility of a milk producer to receive a payment from the 
Reserve Fund on account of the bankruptcy under title 11, United States 
Code, of a milk handler.
    (b) Submission of Claim.--To apply for a payment from the Reserve 
Fund, a milk producer shall submit a claim to the Board in such form 
and containing such information as the Board may require in order to 
evaluate the claim. The information required by the Board shall include 
the following:
            (1) The name of the milk handler the bankruptcy of which 
        has resulted in the nonpayment to the milk producer for milk 
        supplied by the milk producer.
            (2) The name of the State in which the milk handler is 
        licensed.
            (3) The number of days of milk shipments for which the milk 
        producer has not been paid on account of the bankruptcy.
            (4) The quantity of milk involved in those shipments.
            (5) The amount of the payments due to the milk producer for 
        those shipments that has not been paid.
    (c) Eligibility Criteria.--Payments may be made by the Board on a 
claim submitted under this section only in the case of the bankruptcy 
of a milk handler that is licensed by a State and only with respect to 
milk produced by a milk producer after the date of the enactment of 
this title.
    (d) Amount of Payment.--The total amount paid by the Board under 
this section to a milk producer on an approved claim shall be equal to 
80 percent of the total amount due to the milk producer and not paid on 
account of the bankruptcy for shipments of milk by the milk producer 
occurring during the period--
            (1) beginning on the date of the first shipment for which 
        the milk producer is not paid; and
            (2) ending 31 days after that date.
    (e) Partial Payments.--If monies in the Reserve Fund are 
insufficient to make payments under this section in a lump sum, the 
Board may pay approved claims on a pro rata basis while funds are 
generated through assessments under section 104 to permit payment of 
the total amount of the approved claims.
    (f) Reimbursement of Payment.--If a milk producer receives a 
payment from the Reserve Fund and thereafter recovers any or all of the 
money owed by the bankrupt milk handler to that milk producer for the 
same milk, the milk producer shall reimburse the Reserve Fund in an 
amount equal to the amount recovered from the bankrupt milk handler (or 
the estate of the bankrupt milk handler) for the same milk, but not to 
exceed the amount the milk producer received from the Reserve Fund.

SEC. 106. PREEMPTION OF STATE OR LOCAL PAYMENT SECURITY PROGRAMS.

    The provisions of this title preempt any State or local law, 
regulation, requirement, or order with respect to ensuring the payment 
of milk producers for milk sold to a milk handler in situations 
involving the bankruptcy of the milk handler, including State or local 
programs in the form of--
            (1) a reserve fund funded by milk handlers to reimburse 
        milk producers for losses incurred as a result of the 
        bankruptcy of a milk handler subject to this title;
            (2) a statutory trust established for the benefit of milk 
        producers;
            (3) the creation of a priority in favor or for the benefit 
        of a milk producer, without regard to the order of perfection; 
        or
            (4) any similar payment security requirements, including 
        surety bonds, letters of credit, pledges of assets, and cash 
        deposits.

            TITLE II--STATUTORY TRUST FOR LIVESTOCK SELLERS

SEC. 201. ESTABLISHMENT OF STATUTORY TRUST FOR BENEFIT OF SELLERS OF 
              LIVESTOCK TO DEALERS AND MARKET AGENCIES.

    Title III of the Packers and Stockyards Act, 1921 (7 U.S.C. 201 et 
seq.), is amended by adding at the end the following new section:

``SEC. 318. STATUTORY TRUST ESTABLISHED: LIVESTOCK SELLERS.

    ``(a) Definitions.--In this section:
            ``(1) Cash sale.--The term `cash sale' means a sale in 
        which the seller does not expressly extend credit to the buyer.
            ``(2) Trust corpus.--The term `trust corpus' means the 
        following assets of a dealer or market agency subsequent to the 
        purchase of livestock from a seller in a cash sale:
                    ``(A) Accounts receivable and proceeds derived from 
                any resulting sale of the livestock by the dealer or 
                market agency.
                    ``(B) The inventory of the dealer or market agency, 
                except as provided in subsection (d) regarding the 
                rights of a bona fide third-party purchaser for value.
            ``(3) Market agency.--The term `market agency' means any 
        person engaged in the business of buying in commerce livestock 
        on a commission basis.
    ``(b) Establishment of Trust.--A dealer or market agency that 
purchases livestock in a cash sale shall hold the trust corpus in trust 
for the benefit of the unpaid seller of the livestock until such time 
as the seller receives payment in full for the livestock. A payment in 
a cash sale shall not be considered to be made if the instrument by 
which payment is made is dishonored.
    ``(c) Loss of Benefit of Trust.--An unpaid seller shall lose the 
benefit of the trust under subsection (b) unless the seller gives to 
the dealer or market agency and to the Secretary written notice--
            ``(1) within 15 business days after the seller receives 
        notice that the payment instrument promptly presented for 
        payment has been dishonored; or
            ``(2) within 30 days after the final date for making 
        payment under section 409.
    ``(d) Rights of Third-Party Purchaser.--The trust established under 
subsection (b) shall have no effect on the rights of a bona fide third-
party purchaser who has purchased livestock from a dealer or market 
agency, without regard to whether the livestock are delivered to the 
bona fide purchaser.
    ``(e) Exemption.--This section shall not apply with respect to a 
dealer or market agency whose average annual purchases of livestock do 
not exceed $250,000.
    ``(f) Jurisdiction.--The district courts of the United States shall 
have jurisdiction in a civil action--
            ``(1) by the beneficiary of a trust established under 
        subsection (b) to enforce payment of the amount held in trust; 
        and
            ``(2) by the Secretary to prevent and restrain dissipation 
        of the trust corpus.''.
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