SENATE AMENDED
PRIOR PRINTER'S NOS. 3710, 3854 PRINTER'S NO. 4229
No. 2512 Session of 2004
INTRODUCED BY HERSHEY, DALEY, BAKER, BOYD, ARMSTRONG, BASTIAN,
BUNT, CAPPELLI, CAUSER, CLYMER, CORRIGAN, DENLINGER, DeWEESE,
EGOLF, FORCIER, GEIST, GEORGE, GILLESPIE, GINGRICH, HARPER,
HARRIS, HERMAN, HESS, HICKERNELL, KOTIK, LEH, MAITLAND,
MAJOR, McILHATTAN, MILLARD, R. MILLER, O'NEILL, PICKETT,
REICHLEY, SAYLOR, SCAVELLO, SCHRODER, SCRIMENTI, SEMMEL,
SHANER, B. SMITH, SOLOBAY, STERN, R. STEVENSON, E. Z. TAYLOR,
TIGUE, TRUE, WILT, YOUNGBLOOD, ZUG AND ROBERTS,
APRIL 13, 2004
SENATOR WAUGH, AGRICULTURE AND RURAL AFFAIRS, IN SENATE, AS
AMENDED, JUNE 28, 2004
AN ACT
1 Amending the act of July 6, 1984 (P.L.652, No.136), entitled "An
2 act requiring prompt payment to milk producers; providing for
3 the establishment of a security fund; providing for a
4 procedure to process claims against the security fund;
5 providing for alternative methods of security on behalf of
6 milk producers; and providing for certain prohibitions,
7 repeals and penalties," further providing for definitions;
8 providing for passage of title to milk; further providing for
9 security bonds, for bonds, for the security fund and for new
10 licenses; providing for review of security; and further
11 providing for trusteeship, for prohibitions and violations
12 and for penalties.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Section 4 of the act of July 6, 1984 (P.L.652,
16 No.136), known as the Milk Producers' Security Act, is amended
17 to read:
18 Section 4. Definitions.
1 The following words and phrases when used in this act shall
2 have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Blend price." The actual price due or paid to producers
5 after computation of the licensed dealer's or handler's producer
6 obligation pursuant to the applicable rules, regulations or
7 orders of the board or applicable orders established by the
8 United States Department of Agriculture.
9 "Board." The Milk Marketing Board.
10 "Cooperative." A cooperative agricultural association or
11 corporation of producers organized under the laws of this
12 Commonwealth or of any other state, which qualifies as such
13 under the provisions of the Federal Capper-Volstead Act, and
14 engaged in making collective sales or in the marketing of milk
15 for its own members. A cooperative shall not be deemed a milk
16 dealer or handler but shall be deemed a producer, except as
17 provided in section 3(a).
18 "Handle" or "to handle." The doing of any one or several or
19 all of the following acts: to buy, sell, barter, acquire, store,
20 process, consign, receive, transport or control as owner, buyer,
21 seller, consignee, consignor, bailee, bailor, broker or factor.
22 "Handler." A milk dealer.
23 "Milk." Fluid milk sold to a dealer from a producer.
24 "Milk [dealer" or "handler."] dealer." Any person who
25 purchases or receives or handles on consignment or otherwise
26 milk within the Commonwealth, for sale, shipment, storage,
27 processing or manufacture, within or without the Commonwealth,
28 whether on behalf of the person or others, or both. This
29 definition shall not include cooperatives as provided for in
30 section 3(a). The term includes a vested milk dealer.
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1 "Pay period." The dates and terms of payment as required
2 under section 5 and under rules, regulations and orders of the
3 board promulgated pursuant to section 5.
4 "Producer." A person producing milk.
5 "Vested milk dealer." A handler or milk dealer that, on the
6 effective date of this definition, is participating in the
7 security fund under section 9. THE TERM DOES NOT INCLUDE A <--
8 HANDLER OR MILK DEALER PARTICIPATING IN THE SECURITY FUND AS OF
9 THE EFFECTIVE DATE OF THIS DEFINITION THAT AT ANY TIME
10 DISCONTINUES SUCH PARTICIPATION IN THE SECURITY FUND.
11 Section 2. The act is amended by adding a section to read:
12 Section 4.1. Title to milk.
13 (a) The scope of this section is as follows:
14 (1) This section shall apply only to the administration
15 of this act.
16 (2) This section shall have no effect on any provision
17 of the act of April 28, 1937 (P.L.417, No.105), known as the
18 Milk Marketing Law.
19 (3) This section shall not supersede an order of a
20 Federal administrative agency or of the board which requires
21 the cost of shipment of milk to be free on board the place of
22 destination.
23 (b) Notwithstanding 13 Pa.C.S. § 2401(2)(ii) (relating to
24 passing of title; reservation for security; limited application
25 of section), title to milk shall be transferred from the
26 producer to the milk dealer at the point of shipment of the
27 milk.
28 Section 3. Sections 7, 8, 9 and 10 of the act are amended to
29 read:
30 Section 7. Security bonds.
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1 (a) Each milk dealer, as required by this act, shall file
2 with the board a corporate surety bond or collateral bond. The
3 bond shall be on a form prescribed by the board conditioned for
4 the payment by the milk dealer or handler of all amounts due
5 under this act and all other applicable Federal laws in addition
6 to the orders of the board for milk purchased or otherwise
7 acquired from producers by the milk dealer or handler during the
8 license year, which payments shall be made within the time
9 limits specified in this act or the regulations of the board and
10 shall be upon such other terms and conditions as the board may
11 prescribe.
12 (b) A corporate surety bond shall be executed to the
13 Commonwealth by the milk dealer as principal and by a corporate
14 surety company authorized and regulated by the Commonwealth as
15 surety. The board shall have no power to reject any corporate
16 surety bond which is so executed by a corporate surety company
17 authorized to do business in this Commonwealth as surety, so
18 long as the amount of the bond is equal to or less than the
19 amount the surety company is authorized by the Pennsylvania
20 Insurance Commissioner to execute on a single bond without
21 obtaining collateral security from the principal. The board may
22 reject any bond which exceeds that amount. A collateral bond
23 shall be executed to the Commonwealth by the milk dealer as
24 principal, shall set forth the collateral posted with the bond
25 and shall have attached thereto the collateral properly assigned
26 and transferred to this Commonwealth. The collateral posted with
27 the bond shall be cash in an equal amount of the bond or the
28 bond shall be secured by an actual deposit with a bank, bank and
29 trust company or national bank within the Commonwealth of money
30 to the full amount of the bond or securities to the amount of
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1 the bond consisting of interest-bearing obligations of the
2 Federal Government or an irrevocable letter or letters of credit
3 for the account of the milk dealer authorizing the board to draw
4 on a bank or a trust company or banks or trust companies located
5 within and authorized to do business in this Commonwealth.
6 (c) The bond shall be filed in accordance with the
7 following:
8 (1) Except as set forth in paragraph (2), a milk dealer
9 shall file with the board a bond equal to a minimum of 75% of
10 the highest aggregate amount owed by the milk dealer to all
11 producers for a 40-day period during the preceding 12 months.
12 (2) A vested milk dealer shall file with the board a
13 bond in a sum equal to a minimum of 30% of the highest
14 aggregate amount owed by the vested milk dealer to all
15 producers for a 40-day period during the preceding 12 months.
16 [Such bond may exceed the 30% minimum and be equal to the
17 full amount of the money owed, at the discretion of the
18 dealer.]
19 (3) A milk dealer licensed on the effective date of this
20 paragraph, other than a vested milk dealer, may petition the
21 board to file a bond in an amount less than that required by
22 paragraph (1) and to participate in the security fund as a
23 vested milk dealer under section 9. The board shall act upon
24 the petition no less than 60 days from WITHIN 60 DAYS OF the <--
25 date of filing the petition. When considering the petition,
26 the board shall require that the milk dealer provide adequate
27 reason and documentation for the request and may hear
28 testimony from all interested persons potentially affected by
29 the request. The board may impose terms and conditions as it <--
30 deems appropriate, including higher per hundredweight
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1 contributions to the security fund, more frequent payments to
2 producers and the filing of a bond greater than 30% of the
3 highest TO ENSURE THE LEVEL OF PROTECTION FOR PRODUCERS <--
4 CONTEMPLATED BY THIS ACT, THE BOARD SHALL IMPOSE SUCH
5 CONDITIONS AS IT DEEMS APPROPRIATE, INCLUDING, BUT NOT
6 LIMITED TO, THE FOLLOWING MINIMUM CONDITIONS:
7 (I) HIGHER PER HUNDREDWEIGHT CONTRIBUTIONS TO THE
8 SECURITY FUND.
9 (II) MORE FREQUENT PAYMENTS TO PRODUCERS.
10 (III) THE FILING OF A BOND GREATER THAN 30% OF THE
11 HIGHEST aggregate amount owed to producers for a 40-day
12 period during the preceding 12 months., to ensure the <--
13 level of protection for producers contemplated by this
14 act.
15 (4) A milk dealer filing a petition under paragraph (3)
16 may request that the board enter an order requiring that
17 confidential financial information only be disclosed to the
18 board. Such confidential financial information shall be
19 deemed to have been provided to the board pursuant to section
20 310 of the act of April 28, 1937 (P.L.417, No.105), known as
21 the Milk Marketing Law.
22 (d) Milk purchased, acquired or received by a milk dealer or
23 handler from producers outside this Commonwealth and sold or
24 distributed by the dealer or handler as fluid milk within this
25 Commonwealth shall be included in computing the amount of the
26 dealer's or handler's bond, except where the dealer or handler
27 has filed a bond or other security for the protection of the
28 producers with the state wherein the milk is purchased, acquired
29 or received.
30 (e) The obligation of a surety on a bond is a separate and
20040H2512B4229 - 6 -
1 distinct obligation independent of any obligation incurred by
2 the debtor.
3 Section 8. Bonds.
4 Surety bonds or securities for the license year shall be
5 filed with the board on an annual basis not later than the 15th
6 of the month before the beginning of such license year. [Where a
7 dealer elects to participate under the minimum bond requirement
8 as outlined in section 7, in lieu of filing a bond equivalent to
9 75% or more of the greatest amount owed in a 40-day period, he
10 shall notify the board not later than two months prior to the
11 date on which such change is to be made, and shall make the
12 initial payment as required under section 9 not later than one
13 month before such change is to be made.]
14 Section 9. Security fund.
15 (a) Each vested milk dealer shall, in addition to a bond,
16 when less than 75% of the maximum amount owed, also be required
17 to pay monthly 2¢ per hundredweight to the board on all milk
18 purchased from producers during the prior month. The board shall
19 maintain the moneys received in an interest-bearing account and
20 the moneys, including interest, shall be credited to the account
21 of each individual paying vested milk dealer. In the event a
22 vested milk dealer defaults in payment to producers, the moneys
23 submitted by the defaulting vested milk dealer, including
24 interest, shall be made available to the producers shipping to
25 the defaulting vested milk dealer.
26 (b) At the time the value of the bond and the security fund
27 moneys credited to each vested milk dealer shall equal the total
28 amount owed for the above mentioned 40-day payment period, the
29 payments to the fund shall cease or may, with the approval of
30 the board, be used to decrease the value of the bond at the end
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1 of the license year. Should the vested milk dealer agree to post
2 a bond for a minimum of 75% of the highest aggregate amount owed
3 for the 40-day pay period, payment to the security fund shall
4 not be required.
5 (c) Nothing shall prevent any vested milk dealer from
6 increasing the vested milk dealer's bond beyond the 30% nor
7 increasing the amount paid into the security fund credited to
8 the vested milk dealer to provide additional protection for the
9 vested milk dealer's producers.
10 (d) At the time a vested milk dealer discontinues purchasing
11 milk from producers, after all the producers are paid in full,
12 the moneys, including interest and minus the administrative fee,
13 as provided for in subsection (e), shall be returned to the
14 vested milk dealer.
15 (e) The board may impose an administrative fee on the
16 security fund moneys on an annual basis at not more than .5% of
17 the total fund.
18 (f) Any security fund established and maintained under this
19 section shall be considered a security trust fund for the
20 exclusive benefit of producers supplying milk to the vested milk
21 dealer paying into the fund. No claims of the Commonwealth or
22 any other person may be made against the fund until all amounts
23 due to producers for supplying milk to the vested milk dealer
24 have been paid. Amounts paid into the security trust fund shall
25 be considered an expense to the vested milk dealer necessary for
26 maintaining [the dealer's] a license and shall not be considered
27 an asset of the vested milk dealer.
28 Section 10. New licensees.
29 (a) Except as set forth in subsection (b), the following
30 apply:
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1 (1) A milk dealer or handler purchasing or acquiring or
2 receiving or intending to purchase or receive milk from
3 producers, but not so engaged during the preceding 12 months,
4 shall file a bond in a sum to be fixed by the board in
5 accordance with the handler's anticipated purchases from
6 producers and the handler's obligation to a producer
7 settlement or equalization fund, but not less than the total
8 amount expected to be owed during the full 40-day pay period.
9 (2) The board shall review the operations of the milk
10 dealer or handler every two months and the bond shall be
11 modified by the board at the time the board is satisfied that
12 the producers are adequately secured.
13 (3) At the end of six months of operation, upon approval
14 by the board, the [new] milk dealer or handler [may file the
15 amount of the bond and pay into the security fund as required
16 in sections 7 and 9.] shall file a bond in a sum equal to a
17 minimum of 75% of the highest aggregate amount owed or
18 expected to be owed by the milk dealer or handler to all
19 producers for a 40-day period.
20 (b) Subsection (a) does not apply to a vested milk dealer.
21 Section 4. The act is amended by adding a section to read:
22 Section 10.1. Review of security.
23 (a) If the board determines that the financial condition of
24 a milk dealer that purchases milk from a producer is not
25 adequate to reasonably assure prompt payment to producers, the
26 board may require that milk dealer to furnish additional
27 security to afford producers the protection intended by this
28 act.
29 (b) If the board determines that the value of milk purchased
30 or received from a producer by a milk dealer has increased or
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1 may reasonably be anticipated to increase so that the amount of
2 security furnished by the milk dealer does not comply with
3 section 7, as applied to any consecutive two-month period during
4 the current year, the board may require that milk dealer to
5 furnish additional security to afford producers the protection
6 intended by this act.
7 Section 5. Section 11 of the act is amended to read:
8 [Section 11. Trusteeship.
9 (a) In such cases where it appears that the financial
10 condition of the applicant for a license or the licensee is not
11 adequate to reasonably assure payment to producers, the board
12 may require in lieu of other security or payments to the
13 security fund and, where it is practical from an operating
14 standpoint, the licensee to file an agreement providing for the
15 complete control over all processed or manufactured milk and
16 dairy products by a trustee to be selected at least annually by
17 the involved producers. Such trustee shall make and file a
18 trustee's fidelity bond and contracts signed by the operator and
19 the purchasers of the dairy products requiring that payment for
20 such products sold be made to him as trustee. Such trustee shall
21 maintain a separate bank account for that purpose and shall at
22 least twice annually render a true and correct account of his
23 dealings to the board and to the producers. Producers shall have
24 a first lien on assets of trusteeship to assure payment in case
25 of default.
26 (b) The operation of the trustee arrangement, requirements
27 dealing with payments, reports and other operations shall be
28 handled according to regulations established by the board.]
29 Section 6. Section 13 of the act, repealed in part December
30 21, 1984 (P.L.1278, No.243), is amended to read:
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1 Section 13. Prohibitions and violations.
2 (a) No milk dealers license shall be issued to any person or
3 organization not in compliance with the provisions of this act.
4 (b) It shall be unlawful for a milk dealer to purchase or
5 receive milk from producers unless the milk dealer has complied
6 with the provisions of this act.
7 (c) In addition to other penalties provided by law, the
8 board may commence a proceeding in court to seek temporary or
9 injunctive relief against any person violating the provisions of
10 this act.
11 (d) Producers who do not receive payments from licensees in
12 accordance with provisions of this act shall immediately notify
13 the board or its representatives. [At no time shall the holder
14 or provider of the bond or security, nor the trustee be
15 responsible for payments to producers beyond the 40-day pay
16 period when payments are in default after the producer has been
17 notified by certified mail.]
18 (e) If any dealer who purchases or receives milk from
19 producers has not filed a surety bond or securities in lieu
20 thereof, in accordance with this act by the 15th day of the
21 month prior to the beginning of the license year, the board
22 shall notify such producers by certified mail that such milk
23 dealer has not filed any security or made other provisions for
24 assuring payments for milk purchased, for the license year
25 commencing the first day of the next month. The board [then may
26 require a trustee to be selected under the provisions of this
27 act or] shall have the right to revoke the license of said
28 dealer.
29 (f) Each milk dealer shall report to the board any increase
30 or anticipated increase in the value of milk purchased or
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1 received from producers.
2 Section 7. Section 15 of the act is amended to read:
3 Section 15. Penalties.
4 A violation of this act shall subject a milk dealer or a
5 participating cooperative to a penalty of [$50] $150 for each
6 day that it is late in making payment into the security fund of
7 the assessment required by this act, for each day it sells milk
8 to a milk dealer after being notified by the board of the milk
9 dealer's failure to provide security as provided herein or for
10 each day a milk dealer or participating cooperative has failed
11 to make payments for milk purchased as provided pursuant to
12 section 5. Any person who buys or sells in violation of the
13 credit period provided in section 5 shall be liable for
14 suspension or revocation of his milk dealer's license in
15 pursuance of the act of April 28, 1937 (P.L.417, No.105), known
16 as the Milk Marketing Law, or the board may accept from the
17 licensee an offer in compromise, a penalty at the rate of [$50]
18 $150 for each day of violation. A milk dealer that violates
19 section 13(f) shall be liable for suspension or revocation of
20 the milk dealer's license pursuant to the Milk Marketing Law.
21 Section 8. This act shall take effect in 60 days <--
22 IMMEDIATELY. <--
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