2023 New York Laws › AGM - Agriculture and Markets › Article 21 - Milk Control › 258-B - Prompt Payment for Milk Purchases; Security Funds; Bonding of Milk Dealers.

§ 258-b. Prompt payment for milk purchases; security funds; bonding of
milk  dealers. 1. Scope of coverage. (a) For purposes of this section, a
cooperative corporation or association of producers shall be  deemed  to
be  a producer and not a dealer with respect to the milk of its producer
members under contract with such cooperative, and shall be deemed to  be
a  dealer  with  respect  to  milk purchased or received from non-member
producers.
(b) Notwithstanding any other provision  of  this  section,  sales  or
other  transfers  of  milk  between cooperatives shall not be subject to
bond or assessment under the security provisions of this section.
(c)  Any  corporation  or  association  of  persons  engaged  in   the
production  of  agricultural  products  which is operated for the mutual
benefit of its members and which qualifies as such under the  provisions
of  the  Capper-Volstead  Act  shall  be  deemed  to  be  a  cooperative
corporation or association for purposes of this section.
(d) Upon an application of  a  dealer,  and  pursuant  to  regulations
promulgated  to  effectuate  the  provisions of this paragraph, a dealer
that purchases less than one hundred thousand pounds of milk  per  month
shall not be subject to bond or assessment under the security provisions
of   this   section   when  the  commissioner  waives  such  provisions.
Notwithstanding such waiver, a claim may be filed  and  pursued  against
such  a  dealer  as  provided for in this section; and any claim that is
certified for payment by the  commissioner  shall  be  paid  from  funds
derived from license fees assessed upon milk dealers pursuant to section
two hundred fifty-eight-a of this article.
The  defaulting  dealer  shall  be  liable  for  reimbursement  to the
commissioner for the value of the claim in the same  manner  as  if  the
claim  was  paid out of the milk producers security fund as provided for
in paragraph (e) of subdivision five of this section.
2. Prompt payment for milk. (a) Every milk dealer shall: on or  before
the  last day of each month, or such date of payment as established by a
federal milk marketing order regulating the marketing  of  milk  in  the
state  or  a  state milk marketing order promulgated pursuant to section
two hundred fifty-eight-m of this article, whichever is earlier, pay for
all milk received from producers during the first fifteen days  of  such
month  based  upon  a price or formula as determined by the commissioner
and every such milk dealer shall, on or before the twentieth day of each
month, or such  date  of  payment  as  established  by  a  federal  milk
marketing order regulating the marketing of milk in the state or a state
milk  marketing  order  promulgated  pursuant  to  section  two  hundred
fifty-eight-m of this article, whichever is  earlier,  pay  the  balance
owed producers for milk received during the preceding month.
(b)   Notwithstanding   any  other  provision  of  this  section,  the
commissioner may extend the time for payment from dealers  with  respect
to  purchases  from  producers of non-grade A milk for up to one hundred
twenty days after the last day of  the  month  in  which  the  milk  was
received,  provided  such  producers  have  requested  the  extension in
writing in such manner as may be acceptable to the commissioner.
(c) Any producer who  does  not  receive  payment  for  milk  sold  or
delivered  to a milk dealer, within the time prescribed in paragraph (a)
of this subdivision, shall promptly  notify  the  commissioner  of  such
fact.
(d)  All  wholesale  purchasers  of  milk  buying from a licensed milk
dealer shall provide not less than seven  days'  notice  to  their  milk
dealer  supplier  before  changing  suppliers.  All wholesale purchasers
shall make payment in full to their  milk  dealer  supplier  or  satisfy
their  debts  by  an  appropriate  surety  bond  posted  or  other legal
instrument of payment provided, less any legal  rebates,  discounts,  or

other  credit  earned, before changing suppliers. The provisions of this
paragraph shall  apply  only  if  the  milk  dealer  has  satisfied  all
substantial  pre-existing  contractual  agreements  with  the  wholesale
purchaser  prior  to final delivery. For the purposes of this paragraph,
the definition of the term  "wholesale  purchaser  of  milk"  shall  not
include public institutions.
(e)  The  commissioner  may,  if  he  or  she  finds  it is necessary,
promulgate after hearing additional rules  and  regulations  prescribing
the period within which stores, restaurants, hotels, public institutions
and  other  wholesale purchasers of milk shall pay for milk purchased or
received from a licensed dealer. No milk  dealer  or  cooperative  shall
sell  or  deliver  milk,  except  on  a  cash  on delivery basis, to any
wholesale purchaser who has failed  to  make  full  payment  within  the
period   prescribed  in  regulations  promulgated  by  the  commissioner
pursuant to this paragraph.
3. Payments to security funds. (a) Fund and filing  of  surety  bonds.
Any milk dealer, except a cooperative, who has not filed a bond or other
security  in full satisfaction of the requirements of subdivision six or
seven of this section and who buys, receives or otherwise  handles  milk
received  from  producers,  shall, unless entitled to offsetting credits
under paragraph (b) of subdivision four of this section, pay monthly  to
the  commissioner  during  each  fiscal  year  an  amount  up to one and
one-half tenths of one percent of a price per hundredweight of  milk  as
determined  by the commissioner or the average statistical uniform price
per hundredweight of milk for the previous calendar year, as  determined
and  announced  by the commissioner on or before the thirty-first day of
March of each year, on each hundredweight of all  such  milk  purchased,
received  or handled. Such payments by dealers shall be deposited in the
milk producers security fund established by  subdivision  four  of  this
section.
(b)  Whenever the commissioner determines that the balance in the milk
producers security fund exceeds fifteen percent of  the  value  of  milk
purchases  covered  by  the  fund,  the  maximum  rates  established  by
paragraph (a) of this subdivision shall be reduced from one and one-half
tenths of one percent to one-tenth of one percent.
(c) (1) In addition to making such payments for deposit  in  the  milk
producers   security   fund,   any  such  dealer  shall  file  with  the
commissioner a mandatory minimum  surety  bond,  executed  by  a  surety
company  authorized  to  do  business  in this state and approved by the
commissioner, conditioned for the prompt payment of all amounts  due  to
producers  for  milk sold or consigned by them to such dealer during the
license year and  all  amounts  due  to  the  equalization  or  producer
settlement fund of any order promulgated by the commissioner pursuant to
section  two  hundred fifty-eight-m or two hundred fifty-eight-n of this
article or to the equalization or producer settlement fund of a  federal
milk marketing order. The bond shall be twelve times the amount equal to
(i)  the  value  of milk purchased or received from producers in the two
consecutive months during the  preceding  twelve  months  in  which  the
dealer purchased or received the highest aggregate value of milk divided
by  the  number  of days in those two months and (ii) the amount owed in
the same two-month period to the  equalization  or  producer  settlement
fund, divided by the number of days in such months.
(2)  Upon  an  application  of  a  dealer  and pursuant to regulations
promulgated  to  effectuate  the  provisions  of  this  paragraph,   the
commissioner  shall examine the financial condition of the applicant and
may exempt the applicant from the provisions of this  paragraph  if  the
commissioner  finds  that  the  granting  of  the  application would not
materially affect security for producers or the viability  of  the  milk

producers  security fund; provided however, that for any applicant where
the amount calculated in subparagraph one of this  paragraph  multiplied
by  forty-three  is  less  than  two hundred fifty thousand dollars, the
commissioner  shall  exempt  such  applicant from the provisions of this
paragraph unless  the  commissioner  finds  that  the  granting  of  the
application  would  materially  affect security for producers. Rules and
regulations to effectuate the  provisions  of  this  subparagraph  shall
specify  the  criteria to be used in reviewing the applicant's financial
condition, the viability of the milk producers security  fund,  and  the
effect  of  the proposed exemption on the security afforded to producers
delivering milk to the applicant.
(d) The commissioner may require a milk dealer, in addition to  making
payments  to  the  producers  security  fund  and  filing such mandatory
minimum surety bond, to execute and file such further additional  surety
bond  or other security as he may deem acceptable and sufficient, at any
time the commissioner finds (1) that the milk  dealer  has  insufficient
property  located  within  this  state  upon  which to levy, pursuant to
paragraph (e) of subdivision five of this section, in  the  event  of  a
default by a dealer making two monthly payments for forty days purchases
of  milk,  or (2) that the dealer's participation in the fund and filing
such mandatory minimum surety bond will not  otherwise  afford  adequate
security to all producers protected by the fund.
4.  Milk  producers  security fund. (a) There is hereby established in
the joint custody of the comptroller and the  commissioner  of  taxation
and finance a fund to be designated as the milk producers security fund.
The  commissioner  shall  deposit  all monies received from milk dealers
pursuant to paragraph (a) of subdivision three hereof into the fund. The
funds so received and deposited in such  milk  producers  security  fund
shall  not  be  deemed  to  be  state  funds.  The  comptroller shall be
empowered to invest such funds pursuant to section ninety-eight-a of the
state finance law consistent with the  purposes  of  this  section.  The
commissioner is hereby authorized to draw upon such funds, in his or her
discretion,  to  purchase  credit  insurance for the benefit of the milk
producers security fund. The expense of administering the provisions  of
the  milk  producers  security fund and of administering subdivision one
hereof shall be paid from the  fund  to  the  commissioner  on  vouchers
certified  by  the  commissioner  with  the  approval and consent of the
director of the budget. Such payments from the fund shall not exceed two
and one-half percent of the total fund or one hundred  thousand  dollars
per  annum,  whichever  is  greater, provided that, upon approval of the
director of the budget, the actual costs incurred by the  department  in
carrying  out  its  responsibilities  with respect to such provisions of
this article may be assessed against any monies available  to  the  fund
upon  appropriation  by  the legislature. The commissioner shall make an
annual report of the  receipts  to  and  disbursements  from  the  fund,
including  the cost of administration of the fund, which report shall be
made available to each milk dealer and to any  other  person  having  an
interest  in  the  fund. A copy of such report shall be forwarded to the
director of the division of the budget, the chairperson  of  the  senate
finance  committee  and  the  chairperson of the assembly ways and means
committee.
(b) After the milk producers security fund shall have  equaled  twelve
million  dollars or such greater or lesser amount, up to fifteen percent
of the value of milk purchases to be covered  by  the  fund,  calculated
upon  the  basis  of  the  average value of the milk covered by the fund
during the preceding calendar year, as the commissioner may determine is
sufficient to protect the  interests  of  producers,  he  or  she  shall
administer  the  fund in the manner prescribed herein. Periodically, but

at least twice each year, he or she may credit each milk dealer with  an
amount  which bears the same relationship to the total money in the fund
as that dealer's payments to the fund bear to the total payments to  the
fund  by  all  dealers.  If  the  amount so credited to a milk dealer is
greater than that due from such milk dealer, the excess shall be paid or
credited to such milk dealer by the  comptroller.  No  such  credits  or
payments  shall  be made unless the commissioner finds that the fund can
be maintained at a level which is sufficient to protect the interests of
producers. Any such credit to a  milk  dealer's  account  shall  not  be
considered  as payments to the fund in computing further credits of such
nature.
(c) If a milk dealer participating in  the  security  fund  elects  to
terminate  his or her participation therein, he or she shall give notice
in writing to the commissioner six months prior to the expiration of the
license year and file a surety bond or other security on the  first  day
of  the  second  month before the end of the license year. A milk dealer
may thereupon apply for the return of his or her pro rata share  of  the
monies  in  the security fund, less administrative costs, based upon his
or her payments to the fund. Upon being satisfied that the  milk  dealer
is  not in default in any payments to producers or cooperatives and upon
renewal of the license, the commissioner shall authorize the comptroller
to pay to such milk dealer his or her pro rata share in up to six  equal
monthly payments.
(d)  If  a milk dealer who participated in the milk producers security
fund ceases to do business as a milk dealer or sells or transfers his or
her business to another milk dealer, he or she may apply for the  return
of  his  or  her  pro  rata  share or assign his or her interests to the
buying dealer with the approval of the commissioner.
(d-1)  The  commissioner  shall  employ  every  reasonable  effort  to
identify  and  locate all persons entitled to receive unclaimed pro rata
shares  of  former  security  fund  participants.   In   addition,   the
commissioner  shall  for  a  period  of five years after identifying any
person's unclaimed share of one hundred dollars or more,  or  until  the
amount  due  is claimed, whichever is sooner, publish such person's name
and notice of his entitlement in a newspaper of general  circulation  in
every  county where the commissioner knows or has reason to believe such
person maintained a principal office. Notwithstanding any  provision  of
the  abandoned property law, the pro rata shares of former security fund
participants which remain unclaimed for five years or more shall  remain
in  the  producer security fund for use as set forth in this subdivision
and subdivision five of this section.
(e) Any milk dealer who  first  elects  to  participate  in  the  milk
producers  security  fund  shall make an initial payment to the fund, at
the rate most  recently  announced  by  the  commissioner,  pursuant  to
subdivision  three  of  this  section,  for  milk purchased, received or
handled from producers during the six months immediately  preceding  the
date that notice of such election is given the commissioner, pursuant to
subdivision ten of this section. Upon the payment of the initial deposit
into  the  fund  and  filing  of  the  mandatory minimum surety bond, as
required herein, a milk dealer electing to participate in the  fund  may
apply  to  the commissioner for termination or adjustment of an existing
bond or the return or adjustment of any  existing  alternative  security
filed  with  the  commissioner.  If  there have been no prior purchases,
receipts or handling of milk by the dealer, such initial payment and the
amount of such bond shall be based upon an estimate  of  the  purchases,
receipts  or  handling  of  milk by such dealer for the first six months
following  entry  into  the  fund.  After  the  first  six  months,  the

commissioner may adjust such bond and initial deposit so that the amount
of the initial deposit and bond are based upon the actual deliveries.
5.  Claims  against  mandatory  minimum surety bond and milk producers
security fund. (a) If the commissioner has  reason  to  believe  that  a
licensed milk dealer who is participating in the milk producers security
fund  has  defaulted  in  making  payments  for  milk  to producers, the
commissioner shall give reasonable notice to the producers  believed  to
be affected to file verified claims and may fix a reasonable time within
which  such  claims  must  be  filed. Upon learning of such default, the
commissioner shall immediately examine the  records  of  the  defaulting
dealer  and shall identify the amounts which are reasonably estimated to
be owed to producers. Within sixty days of the receipt of a claim  by  a
producer  and  on  the  basis  of  such  estimates, the commissioner may
authorize the comptroller to pay any such producer  up  to  seventy-five
percent   of  such  estimate.  In  connection  with  such  payment,  the
commissioner may make provisions for the recovery for the benefit of the
fund of any payments made pursuant to this paragraph.
(b) No claims against the producers security  fund  shall  be  allowed
for:
(1)  sales  of  milk to dealers not licensed by the state of New
York, or (2) sales of milk by a producer to a milk dealer subsequent  to
its failure to pay within the time periods prescribed in subdivision two
of  this  section,  where  the  commissioner finds, after due notice and
opportunity of hearing, that such extension of credit, whether direct or
indirect, to such milk dealer by  the  producer  did  not  constitute  a
reasonable  exercise  of  business  judgment,  or  (3) the value of milk
produced on farms not located in New York state. Claims shall be limited
to: (1) the price the claimant was required to be paid pursuant  to  the
milk  marketing  order  under which the milk was pooled, if the claimant
did not pool the milk, or (2) the value of the milk as determined by the
commissioner pursuant to provisions of the milk  marketing  order  under
which  the milk was pooled, if the claimant pooled the milk, or (3) such
other price as determined by the commissioner as  appropriate  for  milk
not  pooled  under a milk marketing order, and in no event shall a claim
be allowed for deliveries of milk in excess of the amount owed for  milk
sold  or  delivered  within  the  first forty consecutive day period for
which payment was not received from a dealer. Claims filed by  a  market
administrator  may be allowed for amounts owed by a dealer to a producer
settlement or equalization fund of an order  promulgated  under  section
two  hundred fifty-eight-m or two hundred fifty-eight-n of this article,
or to a producer settlement or  equalization  fund  of  a  federal  milk
marketing order under which the milk is pooled.
(c)  The  commissioner  shall  examine  the claims so filed, determine
after hearing  upon  reasonable  notice  to  the  claimant  and  to  the
defaulting  dealer  the  amount  due  upon  such claims, and certify the
amount due each claimant, provided, however, that no  hearing  shall  be
required with respect to a claim in which the defaulting dealer does not
dispute  liability  and  the  claimant  and  defaulting dealer agree and
stipulate to the amount found by the department to be  payable  on  said
claim.  In  determining the amount payable on any claim against a surety
bond or the milk producers security fund, the commissioner may  allocate
any  payments for milk made by a milk dealer to a claimant subsequent to
its failure to pay within the prescribed time period,  to  the  earliest
debt owed such claimant by the milk dealer. Any amounts determined to be
payable  on  a  claim  will  be  chargeable  first against the mandatory
minimum surety bond and any additional surety  bond  or  other  security
filed  pursuant  to  subdivision three of this section. In the event the
amount of the mandatory minimum surety bond and  any  additional  surety
bond  are  not  sufficient  to pay the amount owed the producers for the

deliveries of milk made in the first forty consecutive  days  for  which
payment  was  not received from a dealer, a claim against the producer's
security fund may be allowed in an amount not to exceed  the  difference
between  the  amount  recoverable on such bonds, and the amount owed for
milk delivered in such applicable period.
(d) The commissioner's determination certifying the  amount  due  each
claimant  shall  be  final  unless  the  defaulting  milk  dealer or the
claimant shall institute a proceeding pursuant to article  seventy-eight
of  the civil practice law and rules within thirty days from the date of
personal service of a copy of the written determination  upon  the  milk
dealer  and  producer  affected  thereby. If after the expiration of the
thirty day period the commissioner's determination has not  been  stayed
by  the  supreme  court  in  a  proceeding  instituted to review it, the
commissioner shall bring an action on the bond or bonds and  proceed  to
obtain  from any other security filed funds with which to pay the claims
and, to the extent that such funds are insufficient to  pay  the  amount
due,  direct  the  comptroller  to  pay  the  claimants  from the moneys
available in the milk producers security fund. For the purposes  of  any
action  brought  on  a  bond,  the commissioner's determination shall be
presumptive evidence of the facts stated therein.
(e) If any claim is paid from the milk producers  security  fund,  the
defaulting dealer shall be liable to the commissioner for the benefit of
the  fund for the amount of claims so paid. After service by first class
mail upon the defaulting dealer of the commissioner's  certification  of
payment  of  a  claim  from the fund for which the dealer has been found
liable to the claimant, the commissioner may issue a warrant under  seal
of  the  department  directed  to the sheriff of any county of the state
commanding him to levy upon and sell the real and personal  property  of
the  defaulting  dealer, found within his county, for the payment of the
amount of such claim  with  interest  and  the  cost  of  executing  the
warrant,  and  to return such warrant to the commissioner and pay to him
the money collected by  virtue  thereof  within  sixty  days  after  the
receipt of such warrant. The commissioner may file with the clerk of any
county  a  copy  of such warrant, and thereupon the clerk shall enter in
the judgment docket, in the column for judgment debtors, the name of the
defaulting dealer designated in the warrant, and in appropriate  columns
the  amount  of  the  dealer's liability to the commissioner for claims,
interest and costs, and the date when such copy is filed. Thereupon  the
amount of such warrant so docketed shall become a lien, relating back to
and  deemed perfected as of the date of the dealer's earliest default in
payment to producers as determined by the commissioner, upon  and  shall
bind  the  real  and  personal  property and chattels real of the person
against whom it is issued in the same manner as a judgment duly docketed
in the office of such clerk. The said sheriff  shall  thereupon  proceed
upon  the same in all respects, with like effect, and in the same manner
prescribed by law in respect to executions issued against property  upon
judgments  of  a court of record, and shall be entitled to the same fees
for his services in executing the warrant, to be collected in  the  same
manner.  Upon such filing of a copy of a warrant, the commissioner shall
have the same remedies to enforce the dealer's liability as  if  he  had
recovered judgment against the dealer for the amount of the warrant.
(f)  In  the  event  that the surety company who shall have executed a
bond for a milk dealer shall fail to make prompt payment of all  amounts
due  producers  for  milk  sold or consigned by them to such milk dealer
during the license year and all  amounts  due  to  the  equalization  or
producer  settlement  fund  of any order promulgated by the commissioner
pursuant  to  section  two  hundred   fifty-eight-m   or   two   hundred
fifty-eight-n  of this article such surety company shall, in addition to

making such payment on the bond, pay interest at the rate  provided  for
in  section  5-501 of the general obligations law on the amounts so owed
from the date of the claim together with reasonable attorneys' fees  and
court costs.
6.  Surety bonds. (a) Each milk dealer who buys, receives or otherwise
handles milk received from producers  may  execute  and  file  with  the
commissioner  a  surety  bond  in  lieu  of  participation  in  the milk
producers security fund and  the  filing  of  a  surety  bond  or  bonds
pursuant  to  subdivision  three  of  this  section.  The  bond shall be
executed by a surety company authorized to do business in this state and
shall be approved by the commissioner. The bond shall be conditioned for
the prompt payment of all amounts due to  producers  for  milk  sold  or
consigned  by  them  to such milk dealer during the license year and all
amounts due to the equalization or producer settlement fund of any order
promulgated  by  the  commissioner  pursuant  to  section  two   hundred
fifty-eight-m  or  two  hundred  fifty-eight-n of this article or to the
equalization or producer settlement fund of  a  federal  milk  marketing
order.  Additionally,  the  bond  shall  make  provisions for an advance
payment pursuant to subdivision nine of this section.
(b) The bond shall be in an amount equal to  (1)  the  value  of  milk
purchased  or  received  from  producers  in  the two consecutive months
during the preceding twelve months in  which  the  dealer  purchased  or
received  the  highest aggregate value of milk, divided by the number of
days in those two months and multiplied by forty,  and  (2)  the  amount
owed  in  the  same  two-month  period  to  the equalization or producer
settlement fund of a state or federal milk marketing order,  divided  by
the number of days in such months and multiplied by forty.
7.  Alternative  security. Each milk dealer buying milk from producers
may in lieu of filing a surety bond pursuant to subdivision three or six
of this section provide an equal amount of protection for the  producers
from  whom he or she purchases or receives milk by filing an irrevocable
letter or  letters  of  credit  for  the  account  of  the  milk  dealer
authorizing the commissioner to draw on a bank or trust company or banks
or  trust  companies authorized to do business in the state of New York.
Such letter or letters shall contain such terms and  conditions  as  the
commissioner may require. Additionally, the irrevocable letter of credit
shall  make  provisions  for  an advance payment pursuant to subdivision
nine of this section.
8. Additional bond or alternative security. Whenever the  commissioner
shall  determine  that  the  value  of  milk  purchased or received from
producers by a dealer who is not participating in the producers security
fund has increased, or that such increase may reasonably be anticipated,
so that the total amount of security does not comply  with  the  formula
set  forth  in subdivision six hereof, as applied to any consecutive two
month period during the current year,  the  commissioner  shall  require
such additional surety bond or securities in lieu thereof as will afford
producers the protection intended by this section.
9.  Claims  against  bond or alternative security. Claims by producers
against a dealer who had filed a bond or alternative security  shall  be
processed  by  the  commissioner  in  the  same manner as is provided in
subdivision five hereof with respect to  claims  against  the  producers
security  fund and such claims shall be subject to the same limitations.
Upon receiving a claim  against  a  dealer  who  had  filed  a  bond  or
alternative  security,  the  commissioner  shall immediately examine the
records of the defaulting dealer and shall identify  the  amounts  which
are  reasonably  estimated to be owed to producers. Within sixty days of
the receipt of a  claim,  and  on  the  basis  of  such  estimates,  the
commissioner  is authorized to pay any such producer up to fifty percent

of such estimate and proceed to obtain from such security the funds with
which to pay any  advances  on  the  claims.  In  connection  with  such
payment,  the commissioner shall make provisions for the recovery of any
payments   made   pursuant   to  this  subdivision.  The  commissioner's
determination certifying the amounts due claimants shall be  subject  to
judicial  review in the same manner and subject to the same limitations.
In the case  of  a  dealer  who  has  filed  alternative  security,  the
commissioner  shall  proceed to obtain from such security the funds with
which to pay the claims. If recovery upon the  alternative  security  is
not  sufficient to pay all claims, the amount recovered shall be divided
pro rata among claimants. In the case of a dealer who has filed a surety
bond, the commissioner may bring an action on  the  bond,  and  for  the
purposes  of  such  action  his determination certifying the amounts due
shall be presumptive evidence of the facts therein stated. In the  event
that  recovery  on  such bond has not been made within sixty days of the
commissioner's certification of the amounts due producers covered by the
bond, the commissioner shall direct the comptroller to pay such  amounts
to  claimants  from  whatever monies are available in the milk producers
security fund. In the event that recovery against the bond has not  been
made  within one hundred eighty days of certification of the amounts due
claimants, each and  every  dealer  having  filed  a  bond  pursuant  to
subdivision six of this section shall pay monthly to the commissioner an
amount not to exceed one-half of one-tenth of one percent of the average
uniform  price per hundredweight of milk for the previous calendar year,
as determined by the commissioner on or before the thirty-first  day  of
March  of  each  year,  on  each  hundredweight  of such milk purchased,
received or handled. Such payments shall continue  for  such  period  of
time as the commissioner deems necessary in order to return to the fund,
no  later  than three years from the date of such payment therefrom, the
total amount paid as a  result  of  the  default  of  such  dealer  plus
interest,  at  the  rate  provided  for  in section 5-501 of the general
obligations law on the amount of such payment  from  the  date  of  such
payment.  In  the event of a recovery on the bond after the commencement
of such payments, the commissioners shall authorize the  comptroller  to
pay to each dealer making such payments its pro rata share of the amount
by  which  the total of such payments exceeds the difference between the
amount received and the total amount paid to claimants.
10. Time for providing security. Surety bonds or  securities,  whether
filed  in  addition  to or in lieu of participation in the fund, for the
license year shall be filed with the commissioner  not  later  than  the
first day of the second month before the beginning of each license year.
Whenever  an  additional surety bond or alternative security is required
to be filed, pursuant to paragraph (a)  of  subdivision  three  of  this
section,  such  bond  or  alternative  security  shall be filed with the
commissioner within the time limits fixed by the  commissioner.  A  milk
dealer who elects to participate in the security fund and file a bond or
bonds pursuant to subdivision three of this section, in lieu of filing a
surety  bond or alternative security pursuant to subdivision six of this
section, shall notify the commissioner not later than three months prior
to the date on which such change is to be made, and shall file the  bond
or  bonds  and make the initial payment, as required by paragraph (e) of
subdivision four of this section, not later than two months before  such
change is to be made.
11.  (a) Notice of failure to provide security. Whenever a milk dealer
fails to pay into the producers security fund or to file any surety bond
or alternative security, as provided pursuant to  this  section,  within
the time or times fixed by this section or the commissioner's demand for
additional  security,  the  commissioner shall publish in a newspaper or

newspapers having  circulation  in  the  area  or  areas  in  which  the
producers  whose milk is sold or delivered to such milk dealer reside, a
notice stating that he made such demand or request of said milk  dealer;
that  the  milk  dealer has failed to comply; that the commissioner does
not have on file such surety bond or alternative security  as  demanded,
or  that  he  has  not  paid  monies  due the producers security fund as
required by him; and that adequate security to  protect  such  producers
may not be available to them as provided in this section. In addition to
such  published  notice  to  producers,  the  commissioner shall send by
certified mail a copy of such notice to each producer delivering milk to
such milk dealer as he may be able to determine from  records  available
to  him and such notice shall be addressed to such producer's last known
place  of  residence.  In  addition  to  providing  such   notice,   the
commissioner  shall  issue a notice of hearing directing the licensee to
appear within twenty-four hours or such longer period as he  may  direct
and show cause why an order should not be entered revoking such dealer's
license  or  denying the renewal thereof for failure to provide required
security.
(b) Payments to farmers. (1) It is hereby determined and declared that
the assurance of prompt and full payment to dairy  farmers  is  for  the
benefit  of  all  the people of the state, and is so directly related to
the public interest, the public health and general welfare that it is an
essential government function.
(2) The commissioner shall annually  no  later  than  November  first,
assess  the  status  of the milk producer security fund, the anticipated
payments from and receipts to the fund for  the  following  fiscal  year
and,  in  connection  with  such  assessment,  estimate  the  additional
amounts, if any, which may be needed by the  fund  to  meet  the  fund's
objectives  in  assuring  prompt  and full payment to dairy farmers. The
commissioner shall transmit this information in a report to the governor
for his use in the preparation of the budget, and to the speaker of  the
assembly  and  the  president  pro  tempore of the senate for use in the
consideration of the budget for such fiscal year.
(3) In the event an appropriation is made for  the  purposes  of  this
paragraph  and, thereafter, upon certification by the commissioner, with
approval of the director of the budget, that a further sum  is  required
by  the  milk  producers  security  fund  to  meet  its  obligations and
accomplish the purposes of this section, the comptroller  shall,  within
the  limits of such appropriation, draw a warrant for the payment to the
milk producers security fund of an amount up to the amount of such  sum.
Such amount shall be a liability of the milk producers security fund and
shall  be  repaid  to  the general fund pursuant to a plan of repayment.
Prior to the institution of  such  a  plan,  a  copy  thereof  shall  be
forwarded  to  the  chairman  of  the  senate  finance committee and the
chairman of the assembly ways  and  means  committee,  for  use  in  the
consideration of the budget for such fiscal year.
(4)  Whenever  the comptroller draws a warrant for payment to the milk
producers security fund as provided in subparagraph  three  hereof,  the
commissioner  shall  implement  the  plan  of  repayment by promulgating
through regulation after hearing an increase in the amount of assessment
imposed under subdivision  three  of  this  section  to  an  amount  not
exceeding two-tenths of one percent of the average uniform price for the
previous year.
15.  Prohibitions  and  violations.  It  shall  be unlawful for a milk
dealer to purchase or receive milk from producers or from other  dealers
for  resale  or  manufacture  unless  such dealer files a surety bond or
bonds as required pursuant to this section and makes prompt  payment  of
any  assessment  as  required pursuant to this section. It shall also be

unlawful for a milk dealer to sell milk to another milk  dealer,  if  he
has  been notified by the commissioner that the buying dealer has failed
to make prompt payment to producers, to the producer settlement fund  or
equalization  fund  or  to  the milk producers security fund, or if such
buying dealer has exceeded the credit period  as  provided  pursuant  to
subdivision two of this section and the sale was not made upon the basis
of cash on delivery.
In addition to penalties imposed by other provisions of this article a
violation  of  this  section shall subject a milk dealer to a penalty in
the sum of one hundred dollars for each day that he is  late  in  making
payment into the milk producers security fund the assessment required by
this  section,  for  each day he sells milk to a milk dealer after being
notified by the commissioner of that milk dealer's failure to  make  any
required  payment into the milk producers security fund, or for each day
a milk dealer sells milk to another milk dealer who has failed  to  make
payments  for  milk purchased as provided pursuant to subdivision two of
this section. Any person who buys or sells  milk  in  violation  of  the
credit  period  provided  in  subdivision  two of this section, shall be
liable for a civil penalty of one hundred dollars a day for each day  of
violation.
16.  Rules  and  regulations.  The  commissioner  after due notice and
public hearing may promulgate rules and regulations  to  carry  out  the
provisions and intent of this section.