SENATE BILL REPORT

SB 6334

BYSenators Barr, Hansen and Halsan

Establishing a uniform commercial code central filing system for agricultural products.

Senate Committee on Agriculture

Senate Hearing Date(s):January 21, 1988

Senate Staff:Kaleen Cottingham (786-7415)

AS OF JANUARY 19, 1988

BACKGROUND:

In 1985 Congress preempted state law regarding security interests in agricultural products.  Congress stated that a buyer of agricultural products takes free of any security interest created by the seller unless either direct notice is given to the buyer or the state has a federally approved central filing system.

Security interests are used to protect lenders and other creditors by using collateral, such as a crop, to secure payment or performance of an obligation.  If a buyer takes free of the security interest, the lender or secured party may have no or limited means by which to collect the amount owed.

The USDA has promulgated specific regulations implementing the 1985 Federal Food Security Act identifying the requirements of state central filing systems.  Ten states have been certified by the USDA as meeting the requisites.

SUMMARY:

A central filing system is established, modeled after the USDA regulations that require (1) identification of secured interest by crop or species; (2) identification by crop year; (3) county produced; (4) social security number or taxpayer number; (5) registration of buyers, commission merchant and selling agents; (6) master list distribution and supplements; and (7) written/printed basis (rather than computer or microfiche).

Under this system, a security interest becomes unenforceable if one of several alternatives is met:

      1)The buyer is registered with the Department of Licensing and does not receive written notice of any security interest;

      2)The secured party does not file an effective financing statement with the Department of Licensing or does not directly notify the buyer; or

      3)The secured party waives the security interest.

The Department of Licensing shall implement this central filing system and may institute a fee schedule to pay for the system.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 14, 1988