Missouri Code of State Regulations › Title 2 - DEPARTMENT OF AGRICULTURE › Division 60 - Grain Inspection and Warehousing › Chapter 5 - Missouri Grain Dealer's Law › Section 2 CSR 60-5.080 - Letters of Credit

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: Amending this rule will remove the
				  requirement that an irrevocable letter of credit, provided in lieu of a grain
				  dealer bond, be issued by a bank chartered under the laws of Missouri. Also,
				  the requirement that an irrevocable letter of credit provided in lieu of a
				  grain dealer bond be negotiable only at a financial institution located within
				  Missouri is removed. The International Chamber of Commerce publication which
				  cites rules that issuing banks are to follow is updated to the current
				  publication number.
(1) A
				letter of credit issued by a commercial bank chartered under the laws of
				Missouri, or any other state, or chartered pursuant to the National Banking
				Act, Title 12 U.S.C. may be submitted to the Missouri Department of Agriculture
				in lieu of a Missouri grain dealer bond as required by sections
				276.401-276.582, RSMo, provided that the commercial bank adopts and adheres to
				the rules enumerated in the International Chamber of Commerce publication
UCP-600
pertaining to letters of credit and issues those
				letters in conformity with Article V of the
Uniform Commercial
				Code
, section
				400.5-101, RSMo. The
				letter of credit must be in an amount equal to the otherwise required bond.
(2) The letter of credit shall be
				irrevocable and the beneficiary shall be the Missouri Department of
				Agriculture. Payment shall be made immediately upon presentment of a sight
				draft(s) or letter of demand signed by the director of agriculture or his/her
				designated representative, without accompanying supporting
				documentation.
(3) All letters of
				credit shall conform to a required format, unless waived in writing by the
				director of agriculture. A standard letter of credit form embodying the
				required format shall be made available upon the request of any licensee or
				prospective licensee. Forms may be obtained by directing an inquiry to the
				Division of Grain Inspection and Warehousing, Missouri Department of
				Agriculture, P. O. Box 630, Jefferson City, MO 65102 or by telephone at (573)
				751-4112.
(4) A sight draft or
				letter of demand upon a letter of credit may be presented for payment only upon
				the reasons that bond proceeds may be demanded for disbursement and shall apply
				to all claims whenever arising.
(5)
				Letters of credit shall have a term of one (1) year which shall be
				automatically renewable for additional one- (1-) year terms. A letter of credit
				may be revoked by the licensee or issuer only at its expiration date by giving
				the Department of Agriculture at least ninety (90) days' written notice, by
				certified mail, prior to renewal date. Notice is not deemed sufficiently given
				unless the director of agriculture receives the cancellation notice in writing,
				by certified mail, at least ninety (90) days prior to the renewal date of the
				letter of credit. Upon notice timely received, the licensee shall be required
				to arrange for substitution of a suitable bond or certificate of deposit (CD)
				at least sixty (60) days prior to the expiration of the letter of credit. If
				satisfactory evidence of these arrangements is not timely received, the
				director shall proceed in accordance with the provisions of section
				276.426,
				RSMo.
(6)  If a
				licensee desires to surrender its license and requests the release of a letter
				of credit, the licensee must return its grain dealer license and make written
				request by registered or certified mail with return receipt for the release of
				the letter of credit. Upon receipt of the written request and the submission of
				the grain dealer license, the director shall hold the letter of credit until
				the director is satisfied that no claims exist, which may include a minimum
				ninety- (90-) day holding period, before notice of release is transmitted to
				the issuer.
(7) In the
				event that a licensee desires to substitute a bond for a letter of credit then
				in possession of the director of agriculture, the letter of credit shall remain
				in force for a period of ninety (90) days following the later of the effective
				date of the bond or the date the bond is received by the director. A substitute
				bond shall be considered as received by the director when the bond is actually
				received or when a binding verbal commitment for a substitute bond has been
				accepted by the director. The director may retain the letter of credit beyond
				ninety (90) days for such time as may be required to fully ascertain the
				existence of any claims. After that, notice of release shall be transmitted to
				the issuer of the letter of credit.
(8) In the
				event that a licensee desires to substitute a CD for a letter of credit, the
				director shall transmit a release to the issuer of the credit letter upon
				receipt and authentication of the CD.
(9) In the
				event that a plurality of letters of credit from any number of issuers is
				presented in satisfaction of a licensee's bonding obligation, the director may
				satisfy claims under the Missouri Grain Dealer's Law by presentment of sight
				drafts or letter of demand against one (1) or more letters of credit, without
				regard to proration.
(10) A
				licensee shall be required to augment letters of credit in any situation where
				it would be required to increase its coverage under a bond; this augmentation
				shall be commensurate to the increased bond value required. In the event of a
				decreased bond requirement, a new letter of credit for the lesser amount may be
				substituted for a prior letter upon the renewal date of the letter of credit,
				or at such time as approved by the director.
(11) If the
				decrease in bond requirement is due to an increase in net worth, a minimum
				ninety- (90-) day holding period may be required from the date the improved net
				worth is accepted by the director.
(12)
				Licensees or prospective licensees may present any combination of CDs, letters
				of credit, and bonds in satisfaction of its bonding requirement under this
				chapter; however, in making disbursements for claims, the director shall
				liquidate the CDs first, draw upon the letters of credit second, and make
				demand upon a bond(s) third.
(13) When the
				director has made written demand for payment of a letter of credit, the letter
				shall be considered paid if the issuing bank, within three (3) days of the
				bank's receipt of that demand, pays the sum demanded to the director, the sum
				demanded or if the issuing bank deposits, at a bank designated by the director,
				in an escrow account solely in the name of the director within three (3) days
				of the bank's receipt of that demand. Deposit of the sum demanded in the escrow
				account shall not constitute refusal or failure of the issuing bank to pay the
				sum demanded to the director and shall prevent a penalty assessment for refusal
				or failure to pay the sum demanded to the director. When the sum demanded is
				deposited in the escrow account, the funds shall remain in the escrow account
				until the liability of the bank has been determined in accordance with sections
				276.401-276.582, RSMo. In the event that a penalty assessment is necessary in
				accordance with sections 276.401-276.582, RSMo, this penalty assessment shall
				begin on the fourth day following the date of the bank's receipt of written
				demand for payment by the director and shall be assessed at the rate of
				one-seventh (1/7) of a week for each day of delay.
*Original authority: 276.406, RSMo 1980, amended 1986,
					 1993, 1995; and 276.431, RSMo 1980, amended 1986,
					 1987.