The Federal Packers and StockyardsAct (PSA), as amended, contains four provisions
to help assurepayment. The first of these is bonding. The Secretaryof Agriculture
is authorized to require reasonable bonds frommarketing agencies, dealers, and
packers whose average annualpurchases exceed $500,000. The proceeds of the bond
are availableto help compensate livestock producers who are not paid forthe livestock
they have sold.
The second provision relates to prompt payment. ThePSA also provides
that dealers, market agencies, and packersmust issue a check for the full amount
of the purchase pricebefore the close of the next business day following the purchaseof
livestock. The prompt payment requirement can, however, bewaived by an express
written agreement between the buyer andseller.
The third provision is the creation of a statutory trust.The PSA also
requires that livestock purchased by the packerfor cash, as well as meat inventory
and proceeds from the saleof meat, be held in trust for the benefit of all unpaid
cashsellers of livestock. Should the packer go bankrupt, the statutorytrust assures
that the unpaid sellers of livestock will be paidfrom trust assets ahead of the
bankrupt packerís lenders. Itshould be noted that the producers must give the
Secretary ofAgriculture timely written notice if the packers final paymentbecomes
delinquent or if the check bounces. If producers donítgive timely notice, the
producers lose the protection of thestatutory trust. It should also be noted that
the statutorytrust provisions only apply to packers with purchases exceeding$500,000.
The fourth provision is reparation. The PSA establishesa special procedure
for unpaid livestock sellers to a marketingagency or dealer. The procedure can
start with a complaint fromthe unpaid seller to the Grain Inspection, Packers
and StockyardsAdministration. The procedure can end with a reparation orderthat
the unpaid seller is due a particular amount. The reparationorder may be enforced
through the courts. In effect, this provisionshifts from the seller to the U.S.
Department of Agriculturesome of the cost of investigating and proving that payment
Although the bankruptcy of a packer or livestock dealer maybe unlikely, sellers
of livestock can take some comfort is theprovisions of federal and state law that
help assure that unpaidlivestock sellers will receive some payment.
Click on TheFederal
Packers and Stockyards Act to see the actual federallaw.
Also, click hereto
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