I
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 deal-
ers, or market agencies.
Be it enacted by the Senate and House of Representa-
tives 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 Re-
serve 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 com-
mercially milk or milk products.
(4) MILK
PRODUCER.—The term ‘‘milk pro-
ducer’’ means a person who produces milk in the 48
contiguous States and markets such milk for com-
mercial 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 sim-
ply 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 assess-
ments.
(3) Amounts borrowed by the Board.
(4) Interest from investments made under sub-
section (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 in-
curred by the Secretary or the Board in administer-
ing 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 in-
vest 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 ac-
count 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 bor-
row money for deposit into the Reserve Fund if the Board
chusetts, Mississippi, New Hampshire, New
Jersey, New York, North Carolina, Ohio, Penn-
sylvania, Rhode Island, South Carolina, Ten-
nessee, Texas, Vermont, Virginia, and West
Virginia.
(B) Region II: Illinois, Iowa, Michigan,
Minnesota, Missouri, North Dakota, South Da-
kota, and Wisconsin.
(C) Region III: Arizona, California, Colo-
rado, Idaho, Kansas, Montana, Nebraska, Ne-
vada, 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 va-
cancy 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 re-
quired to be away from their home or place of busi-
ness 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 Sec-
retary shall appoint the members specified under
subsection (b)(1) from nominees submitted pursuant
to paragraph (2).
(2) SOLICITATION
OF
NOMINEES.—The Sec-
retary shall begin the process of filling a particular
position on the Board by soliciting the names of per-
sons 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 qualifica-
tions 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 particu-
lar position on the Board, the Secretary may make
the appointment in such other manner as the Sec-
retary 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 meet-
ing 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 REP-
RESENTATION.—The Board shall notify the Sec-
retary 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 mem-
ber of the Board.
(4) CHAIRPERSON.—The members of the Board
shall select one of the members to serve as the chair-
person 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 Sec-
retary 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 Re-
serve Fund reaches the maximum capital contribu-
tion 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 ac-
tivities.
(g) GENERAL POWERS OF THE BOARD.—
(1) BYLAWS
AND
RULES.—The Board may
adopt bylaws and issue rules and regulations govern-
ing the manner in which its business may be con-
ducted 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 com-
mon 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 re-
gard to the amount in controversy, and the Board,
in any capacity, without bond or security, may re-
move 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 activi-
ties of the Board during the preceding fiscal year, expendi-
tures 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 expendi-
tures from the Reserve Fund during the fiscal year in
which the report is submitted.
SEC. 104. COLLECTION OF ASSESSMENTS FROM MILK HAN-
DLERS 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 enact-
ment 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 assess-
ment 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 sec-
tion 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 Sec-
retary shall refund the amount in excess of
$30,000,000 to all milk handlers that are in oper-
ation 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 han-
dler 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 sec-
tion 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 record-
keeping 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 viola-
tion, 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 en-
force this section in the courts of the United States.
(f) NO EFFECT
ON PRODUCER PRICES.—Assess-
ments 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), reen-
acted with amendments by the Agricultural Market-
ing 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 in-
formation 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 bank-
ruptcy of which has resulted in the nonpayment to
the milk producer for milk supplied by the milk pro-
ducer.
(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 ac-
count of the bankruptcy.
(4) The quantity of milk involved in those ship-
ments.
(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 pro-
ducer 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 assess-
ments under section 104 to permit payment of the total
amount of the approved claims.
(f) REIMBURSEMENT OF PAYMENT.—If a milk pro-
ducer 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 SE-
CURITY PROGRAMS.
The provisions of this title preempt any State or local
law, regulation, requirement, or order with respect to en-