PRIOR PRINTER'S NO. 3710 PRINTER'S NO. 3854
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 AND ZUG, APRIL 13, 2004
AS REPORTED FROM COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, MAY 12, 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. 19 The following words and phrases when used in this act shall
1 have the meanings given to them in this section unless the 2 context clearly indicates otherwise: 3 "Blend price." The actual price due or paid to producers 4 after computation of the licensed dealer's or handler's producer 5 obligation pursuant to the applicable rules, regulations or 6 orders of the board or applicable orders established by the 7 United States Department of Agriculture. 8 "Board." The Milk Marketing Board. 9 "Cooperative." A cooperative agricultural association or 10 corporation of producers organized under the laws of this 11 Commonwealth or of any other state, which qualifies as such 12 under the provisions of the Federal Capper-Volstead Act, and 13 engaged in making collective sales or in the marketing of milk 14 for its own members. A cooperative shall not be deemed a milk 15 dealer or handler but shall be deemed a producer, except as 16 provided in section 3(a). 17 "Handle" or "to handle." The doing of any one or several or 18 all of the following acts: to buy, sell, barter, acquire, store, 19 process, consign, receive, transport or control as owner, buyer, 20 seller, consignee, consignor, bailee, bailor, broker or factor. 21 "Handler." A milk dealer. 22 "Milk." Fluid milk sold to a dealer from a producer. 23 "Milk [dealer" or "handler."] dealer." Any person who 24 purchases or receives or handles on consignment or otherwise 25 milk within the Commonwealth, for sale, shipment, storage, 26 processing or manufacture, within or without the Commonwealth, 27 whether on behalf of the person or others, or both. This 28 definition shall not include cooperatives as provided for in 29 section 3(a). The term includes a vested milk dealer. 30 "Pay period." The dates and terms of payment as required 20040H2512B3854 - 2 -
1 under section 5 and under rules, regulations and orders of the 2 board promulgated pursuant to section 5. 3 "Producer." A person producing milk. 4 "Vested milk dealer." A handler or milk dealer that, on the 5 effective date of this definition, is participating in the 6 security fund under section 9. 7 Section 2. The act is amended by adding a section to read: 8 Section 4.1. Title to milk. 9 (a) The scope of this section is as follows: 10 (1) This section shall apply only to the administration 11 of this act. 12 (2) This section shall have no effect on any provision 13 of the act of April 28, 1937 (P.L.417, No.105), known as the 14 Milk Marketing Law. 15 (3) This section shall not supersede an order of a 16 Federal administrative agency or of the board which requires 17 the cost of shipment of milk to be free on board the place of 18 destination. 19 (b) Notwithstanding 13 Pa.C.S. § 2401(2)(ii) (relating to 20 passing of title; reservation for security; limited application 21 of section), title to milk shall be transferred from the 22 producer to the milk dealer at the point of shipment of the 23 milk. 24 Section 3. Sections 7, 8, 9 and 10 of the act are amended to 25 read: 26 Section 7. Security bonds. 27 (a) Each milk dealer, as required by this act, shall file 28 with the board a corporate surety bond or collateral bond. The 29 bond shall be on a form prescribed by the board conditioned for 30 the payment by the milk dealer or handler of all amounts due 20040H2512B3854 - 3 -
1 under this act and all other applicable Federal laws in addition 2 to the orders of the board for milk purchased or otherwise 3 acquired from producers by the milk dealer or handler during the 4 license year, which payments shall be made within the time 5 limits specified in this act or the regulations of the board and 6 shall be upon such other terms and conditions as the board may 7 prescribe. 8 (b) A corporate surety bond shall be executed to the 9 Commonwealth by the milk dealer as principal and by a corporate 10 surety company authorized and regulated by the Commonwealth as 11 surety. The board shall have no power to reject any corporate 12 surety bond which is so executed by a corporate surety company 13 authorized to do business in this Commonwealth as surety, so 14 long as the amount of the bond is equal to or less than the 15 amount the surety company is authorized by the Pennsylvania 16 Insurance Commissioner to execute on a single bond without 17 obtaining collateral security from the principal. The board may 18 reject any bond which exceeds that amount. A collateral bond 19 shall be executed to the Commonwealth by the milk dealer as 20 principal, shall set forth the collateral posted with the bond 21 and shall have attached thereto the collateral properly assigned 22 and transferred to this Commonwealth. The collateral posted with 23 the bond shall be cash in an equal amount of the bond or the 24 bond shall be secured by an actual deposit with a bank, bank and 25 trust company or national bank within the Commonwealth of money 26 to the full amount of the bond or securities to the amount of 27 the bond consisting of interest-bearing obligations of the 28 Federal Government or an irrevocable letter or letters of credit 29 for the account of the milk dealer authorizing the board to draw 30 on a bank or a trust company or banks or trust companies located 20040H2512B3854 - 4 -
1 within and authorized to do business in this Commonwealth. 2 (c) The bond shall be filed in accordance with the 3 following: 4 (1) Except as set forth in paragraph (2), a milk dealer 5 shall file with the board a bond equal to a minimum of 75% of 6 the highest aggregate amount owed by the milk dealer to all 7 producers for a 40-day period during the preceding 12 months. 8 (2) A vested milk dealer shall file with the board a 9 bond in a sum equal to a minimum of 30% of the highest 10 aggregate amount owed by the vested milk dealer to all 11 producers for a 40-day period during the preceding 12 months. 12 [Such bond may exceed the 30% minimum and be equal to the 13 full amount of the money owed, at the discretion of the 14 dealer.] 15 (3) A MILK DEALER LICENSED ON THE EFFECTIVE DATE OF THIS <-- 16 PARAGRAPH, OTHER THAN A VESTED MILK DEALER, MAY PETITION THE 17 BOARD TO FILE A BOND IN AN AMOUNT LESS THAN THAT REQUIRED BY 18 PARAGRAPH (1) AND TO PARTICIPATE IN THE SECURITY FUND AS A 19 VESTED MILK DEALER UNDER SECTION 9. THE BOARD SHALL ACT UPON 20 THE PETITION NO LESS THAN 60 DAYS FROM THE DATE OF FILING THE 21 PETITION. WHEN CONSIDERING THE PETITION, THE BOARD SHALL 22 REQUIRE THAT THE MILK DEALER PROVIDE ADEQUATE REASON AND 23 DOCUMENTATION FOR THE REQUEST AND MAY HEAR TESTIMONY FROM ALL 24 INTERESTED PERSONS POTENTIALLY AFFECTED BY THE REQUEST. THE 25 BOARD MAY IMPOSE TERMS AND CONDITIONS AS IT DEEMS 26 APPROPRIATE, INCLUDING HIGHER PER HUNDREDWEIGHT CONTRIBUTIONS 27 TO THE SECURITY FUND, MORE FREQUENT PAYMENTS TO PRODUCERS AND 28 THE FILING OF A BOND GREATER THAN 30% OF THE HIGHEST 29 AGGREGATE AMOUNT OWED TO PRODUCERS FOR A 40-DAY PERIOD DURING 30 THE PRECEDING 12 MONTHS, TO ENSURE THE LEVEL OF PROTECTION 20040H2512B3854 - 5 -
1 FOR PRODUCERS CONTEMPLATED BY THIS ACT. 2 (4) A MILK DEALER FILING A PETITION UNDER PARAGRAPH (3) 3 MAY REQUEST THAT THE BOARD ENTER AN ORDER REQUIRING THAT 4 CONFIDENTIAL FINANCIAL INFORMATION ONLY BE DISCLOSED TO THE 5 BOARD. SUCH CONFIDENTIAL FINANCIAL INFORMATION SHALL BE 6 DEEMED TO HAVE BEEN PROVIDED TO THE BOARD PURSUANT TO SECTION 7 310 OF THE ACT OF APRIL 28, 1937 (P.L.417, NO.105), KNOWN AS 8 THE MILK MARKETING LAW. 9 (d) Milk purchased, acquired or received by a milk dealer or 10 handler from producers outside this Commonwealth and sold or 11 distributed by the dealer or handler as fluid milk within this 12 Commonwealth shall be included in computing the amount of the 13 dealer's or handler's bond, except where the dealer or handler 14 has filed a bond or other security for the protection of the 15 producers with the state wherein the milk is purchased, acquired 16 or received. 17 (e) The obligation of a surety on a bond is a separate and 18 distinct obligation independent of any obligation incurred by 19 the debtor. 20 Section 8. Bonds. 21 Surety bonds or securities for the license year shall be 22 filed with the board on an annual basis not later than the 15th 23 of the month before the beginning of such license year. [Where a 24 dealer elects to participate under the minimum bond requirement 25 as outlined in section 7, in lieu of filing a bond equivalent to 26 75% or more of the greatest amount owed in a 40-day period, he 27 shall notify the board not later than two months prior to the 28 date on which such change is to be made, and shall make the 29 initial payment as required under section 9 not later than one 30 month before such change is to be made.] 20040H2512B3854 - 6 -
1 Section 9. Security fund. 2 (a) Each vested milk dealer shall, in addition to a bond, 3 when less than 75% of the maximum amount owed, also be required 4 to pay monthly 2c/ per hundredweight to the board on all milk 5 purchased from producers during the prior month. The board shall 6 maintain the moneys received in an interest-bearing account and 7 the moneys, including interest, shall be credited to the account 8 of each individual paying vested milk dealer. In the event a 9 vested milk dealer defaults in payment to producers, the moneys 10 submitted by the defaulting vested milk dealer, including 11 interest, shall be made available to the producers shipping to 12 the defaulting vested milk dealer. 13 (b) At the time the value of the bond and the security fund 14 moneys credited to each vested milk dealer shall equal the total 15 amount owed for the above mentioned 40-day payment period, the 16 payments to the fund shall cease or may, with the approval of 17 the board, be used to decrease the value of the bond at the end 18 of the license year. Should the vested milk dealer agree to post 19 a bond for a minimum of 75% of the highest aggregate amount owed 20 for the 40-day pay period, payment to the security fund shall 21 not be required. 22 (c) Nothing shall prevent any vested milk dealer from 23 increasing the vested milk dealer's bond beyond the 30% nor 24 increasing the amount paid into the security fund credited to 25 the vested milk dealer to provide additional protection for the 26 vested milk dealer's producers. 27 (d) At the time a vested milk dealer discontinues purchasing 28 milk from producers, after all the producers are paid in full, 29 the moneys, including interest and minus the administrative fee, 30 as provided for in subsection (e), shall be returned to the 20040H2512B3854 - 7 -
1 vested milk dealer. 2 (e) The board may impose an administrative fee on the 3 security fund moneys on an annual basis at not more than .5% of 4 the total fund. 5 (f) Any security fund established and maintained under this 6 section shall be considered a security trust fund for the 7 exclusive benefit of producers supplying milk to the vested milk 8 dealer paying into the fund. No claims of the Commonwealth or 9 any other person may be made against the fund until all amounts 10 due to producers for supplying milk to the vested milk dealer 11 have been paid. Amounts paid into the security trust fund shall 12 be considered an expense to the vested milk dealer necessary for 13 maintaining [the dealer's] a license and shall not be considered 14 an asset of the vested milk dealer. 15 Section 10. New licensees. 16 (a) Except as set forth in subsection (b), the following 17 apply: 18 (1) A milk dealer or handler purchasing or acquiring or 19 receiving or intending to purchase or receive milk from 20 producers, but not so engaged during the preceding 12 months, 21 shall file a bond in a sum to be fixed by the board in 22 accordance with the handler's anticipated purchases from 23 producers and the handler's obligation to a producer 24 settlement or equalization fund, but not less than the total 25 amount expected to be owed during the full 40-day pay period. 26 (2) The board shall review the operations of the milk 27 dealer or handler every two months and the bond shall be 28 modified by the board at the time the board is satisfied that 29 the producers are adequately secured. 30 (3) At the end of six months of operation, upon approval 20040H2512B3854 - 8 -
1 by the board, the [new] milk dealer or handler [may file the 2 amount of the bond and pay into the security fund as required 3 in sections 7 and 9.] shall file a bond in a sum equal to a 4 minimum of 75% of the highest aggregate amount owed or 5 expected to be owed by the milk dealer or handler to all 6 producers for a 40-day period. 7 (b) Subsection (a) does not apply to a vested milk dealer. 8 Section 4. The act is amended by adding a section to read: 9 Section 10.1. Review of security. 10 (a) If the board determines that the financial condition of 11 a milk dealer that purchases milk from a producer is not 12 adequate to reasonably assure prompt payment to producers, the 13 board may require that milk dealer to furnish additional 14 security to afford producers the protection intended by this 15 act. 16 (b) If the board determines that the value of milk purchased 17 or received from a producer by a milk dealer has increased or 18 may reasonably be anticipated to increase so that the amount of 19 security furnished by the milk dealer does not comply with 20 section 7, as applied to any consecutive two-month period during 21 the current year, the board may require that milk dealer to 22 furnish additional security to afford producers the protection 23 intended by this act. 24 Section 5. Section 11 of the act is amended to read: 25 [Section 11. Trusteeship. 26 (a) In such cases where it appears that the financial 27 condition of the applicant for a license or the licensee is not 28 adequate to reasonably assure payment to producers, the board 29 may require in lieu of other security or payments to the 30 security fund and, where it is practical from an operating 20040H2512B3854 - 9 -
1 standpoint, the licensee to file an agreement providing for the 2 complete control over all processed or manufactured milk and 3 dairy products by a trustee to be selected at least annually by 4 the involved producers. Such trustee shall make and file a 5 trustee's fidelity bond and contracts signed by the operator and 6 the purchasers of the dairy products requiring that payment for 7 such products sold be made to him as trustee. Such trustee shall 8 maintain a separate bank account for that purpose and shall at 9 least twice annually render a true and correct account of his 10 dealings to the board and to the producers. Producers shall have 11 a first lien on assets of trusteeship to assure payment in case 12 of default. 13 (b) The operation of the trustee arrangement, requirements 14 dealing with payments, reports and other operations shall be 15 handled according to regulations established by the board.] 16 Section 6. Section 13 of the act, repealed in part December 17 21, 1984 (P.L.1278, No.243), is amended to read: 18 Section 13. Prohibitions and violations. 19 (a) No milk dealers license shall be issued to any person or 20 organization not in compliance with the provisions of this act. 21 (b) It shall be unlawful for a milk dealer to purchase or 22 receive milk from producers unless the milk dealer has complied 23 with the provisions of this act. 24 (c) In addition to other penalties provided by law, the 25 board may commence a proceeding in court to seek temporary or 26 injunctive relief against any person violating the provisions of 27 this act. 28 (d) Producers who do not receive payments from licensees in 29 accordance with provisions of this act shall immediately notify 30 the board or its representatives. [At no time shall the holder 20040H2512B3854 - 10 -
1 or provider of the bond or security, nor the trustee be 2 responsible for payments to producers beyond the 40-day pay 3 period when payments are in default after the producer has been 4 notified by certified mail.] 5 (e) If any dealer who purchases or receives milk from 6 producers has not filed a surety bond or securities in lieu 7 thereof, in accordance with this act by the 15th day of the 8 month prior to the beginning of the license year, the board 9 shall notify such producers by certified mail that such milk 10 dealer has not filed any security or made other provisions for 11 assuring payments for milk purchased, for the license year 12 commencing the first day of the next month. The board [then may 13 require a trustee to be selected under the provisions of this 14 act or] shall have the right to revoke the license of said 15 dealer. 16 (f) Each milk dealer shall report to the board any increase 17 or anticipated increase in the value of milk purchased or 18 received from producers. 19 Section 7. Section 15 of the act is amended to read: 20 Section 15. Penalties. 21 A violation of this act shall subject a milk dealer or a 22 participating cooperative to a penalty of [$50] $150 for each 23 day that it is late in making payment into the security fund of 24 the assessment required by this act, for each day it sells milk 25 to a milk dealer after being notified by the board of the milk 26 dealer's failure to provide security as provided herein or for 27 each day a milk dealer or participating cooperative has failed 28 to make payments for milk purchased as provided pursuant to 29 section 5. Any person who buys or sells in violation of the 30 credit period provided in section 5 shall be liable for 20040H2512B3854 - 11 -
1 suspension or revocation of his milk dealer's license in 2 pursuance of the act of April 28, 1937 (P.L.417, No.105), known 3 as the Milk Marketing Law, or the board may accept from the 4 licensee an offer in compromise, a penalty at the rate of [$50] 5 $150 for each day of violation. A milk dealer that violates 6 section 13(f) shall be liable for suspension or revocation of 7 the milk dealer's license pursuant to the Milk Marketing Law. 8 Section 8. This act shall take effect in 60 days. C29L31VDL/20040H2512B3854 - 12 -