I
103D CONGRESS
2D SESSION
H. R. 4134
To establish a reserve fund to reimburse milk producers for losses incurred
as a result of the bankruptcy of a milk handler that marketed raw
milk from the producers, to provide funds for the reserve fund through
an assessment on all milk handlers, and to establish a Board of Trustees
to administer the reserve fund.
IN THE HOUSE OF REPRESENTATIVES
MARCH 24, 1994
Mr. GUNDERSON introduced the following bill; which was referred to the
Committee on Agriculture
A BILL
To establish a reserve fund to reimburse milk producers
for losses incurred as a result of the bankruptcy of
a milk handler that marketed raw milk from the produc-
ers, to provide funds for the reserve fund through an
assessment on all milk handlers, and to establish a Board
of Trustees to administer the reserve fund.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Dairy Industry Security Reserve Fund Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Definitions.
Sec. 3. Establishment of Dairy Industry Security Reserve Fund.
Sec. 4. Establishment of Board of Trustees for Dairy Industry Security Re-
serve Fund.
Sec. 5. Collection of assessments from milk handlers to fund Reserve Fund.
Sec. 6. Submission and payment of claims of milk producers for nonpayment
for milk shipments.
Sec. 7. Preemption of State or local payment security programs.
SEC. 2. DEFINITIONS.
For purposes of this Act:
(1) BOARD.—The term ‘‘Board’’ means the
Board of Trustees established under section 4 to ad-
minister 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
(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 4(f), the expenses in-
curred by the Secretary or the Board in administer-
ing this Act; 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
determines that amounts in the Reserve Fund are insuffi-
cient to satisfy approved claims.
SEC. 4. 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 Secu-
rity Reserve Fund, set and collect assessments under sec-
tion 5 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 Act or
the Secretary.
(b) MEMBERSHIP.—
(1) APPOINTMENT OF MEMBERS.—The Board
shall consist of nine members appointed by the Sec-
retary 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 5 and
the principal place of business of which is Re-
gion I.
(E) One member selected from among the
officers or employees of milk handlers that are
subject to the assessment under section 5 and
the principal place of business of which is Re-
gion II.
(F) One member selected from among the
officers or employees of milk handlers that are
subject to the assessment under section 5 and
the principal place of business of which is Re-
gion 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 Sec-
retary 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, Con-
necticut, Delaware, Florida, Georgia, Indiana,
Kentucky, Louisiana, Maine, Maryland, Massa-
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
(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 Act.
(5) 
MISCELLANEOUS
AUTHORITIES.—The
Board may exercise such other powers incidental to
its performance of functions required or authorized
for it under this Act.
(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. 5. 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 Act; 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 6 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) 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), 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. 6. 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
Act.
(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 5 to permit payment of the total
amount of the approved claims.
SEC. 7. PREEMPTION OF STATE OR LOCAL PAYMENT SECU-
RITY PROGRAMS.
The provisions of this Act preempt any State or local
law or regulation with respect to the prompt payment of
milk producers for milk sold to milk handlers subject to
this Act, regardless of whether the State or local program
is in the form of—
(1) a reserve fund funded by milk handlers to
reimburse milk producers for losses incurred as a re-
sult of the bankruptcy of a milk handler subject to
this Act;
(2) a statutory trust established for the benefit
of milk producers; and
(3) any similar payment security requirements,
including surety bonds, letters of credit, pledges of
assets, and cash deposits.
Æ
HR 4134 IH——2