SSB 3160 (LSB 5583XC (5) 84)

SENATE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON MCCOY)

A BILL FOR

An Act relating to security interests in farm products, providing for fees and their expenditure, and including contingent applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 554.9102, subsection 4, Code 2011, is amended by striking the subsection.
    Sec. 2.  Section 554.9302, Code 2011, is amended to read as follows:
   554.9302  Law governing perfection and priority of agricultural liens.
   1.  While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products.
   2.  Subsection 1 does not apply to buyers of farm products as provided in chapter 554E.
    Sec. 3.  NEW SECTION.  554E.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Buyer” means a person who, in the ordinary course of business, buys farm products from a person engaged in farming operations who is in the business of selling farm products. A buyer includes a commission merchant and selling agent.
   2.  “Central filing system” means a system for filing effective financing statements, and statements amending, continuing, or terminating effective financing statements as provided in section 554E.4.
   3.  “Commission merchant” means a person engaged in the business of receiving any farm product for sale, on commission, or for or on behalf of another person.
   4.  “Crop year” means the calendar year in which a crop is or will be harvested, animals are born or acquired, or poultry or eggs are or will be sold.
   5.  “Effective financing statement” means a financing statement required to be filed as part of the central filing system as provided in section 554E.6.
   6.  “Knows” means having actual knowledge. “Knowledge” means actual knowledge.
   7.  “Secretary” means the secretary of state.

   8.  “Security interest” means an interest in farm products that secures payment or performance of an obligation in the same manner as provided in chapter 554.
   9.  “Selling agent” means a person, other than a commission merchant, who is engaged in the business of negotiating the sale and purchase of a farm product on behalf of a person engaged in farming operations.
   10.  “Signature” means to sign, execute, or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of authenticating for purposes of identifying the person and adopting or accepting a record.
    Sec. 4.  NEW SECTION.  554E.2  Special definitions.
   To every extent consistent with the application of federal law, unless the context otherwise requires:
   1.  “Agricultural lien” means the same as defined in section 554.9102.
   2.  “Debtor” means a debtor as defined in section 554.9102 who has an interest other than a security interest or lien in a farm product, or any other person who owns a farm product and subjects it to a security interest whether or not that person owes a debt to the secured party.
   3.  “Farm products” means the same as defined in section 554.9102.
   4.  “Farming operation” means the same as defined in section 554.9102.
   5.  “Secured party” means a secured party as defined in section 554.9102 in whose favor a security interest in farm products is created.
   6.  “Security interest” means an interest in farm products that secures payment or performance of an obligation in the same manner as provided in chapter 554.
    Sec. 5.  NEW SECTION.  554E.3  Uniform commercial code.
   This chapter shall be interpreted in conjunction with chapter 554, and terms and phrases used in this chapter shall, to every extent practicable, be interpreted consistently with chapter 554, article 9.
    Sec. 6.  NEW SECTION.  554E.4  Central filing system —— establishment and certification.
   The secretary of state shall establish and administer a central filing system for filing effective financing statements or statements amending, continuing, or terminating effective financing statements on a statewide basis.
   1.  The central filing system shall provide for the electronic filing and examining of effective financing statements, or statements amending, continuing, or terminating effective financing statements.
   2.  The central filing system shall be designed to allow persons to file and examine these documents using the internet. The secretary may provide for the filing and examining of the documents in a paper format.
   3.  The central financing system must comply with the requirements set forth in 7 U.S.C. § 1631 which has been certified by the United States secretary of agriculture prior to implementation.
    Sec. 7.  NEW SECTION.  554E.5  Effective financing statements —— filing requirements.
   The secretary of state shall provide for filing effective financing statements, and statements amending, continuing, or terminating effective financing statements, as provided in this section. The secretary shall prescribe all forms to be used for filing. Presentation for filing of a statement and the acceptance of the statement by the secretary constitutes filing under this section.
   1.  An effective financing statement shall be valid if it substantially complies with the requirements of this section even though it contains minor errors that are not seriously misleading.
   2.  An effective financing statement must be an original or reproduced copy which is signed by the secured party and the debtor. If filed electronically, the debtor is not required to sign the effective financing statement. The statement must be filed with the secretary by the secured party. The secretary shall record the date and hour of the filing of the effective financing statement. The statement must contain information that the secretary requires to comply with 7 U.S.C. § 1631 or to administer this section.
   3.  An effective financing statement must contain all of the following:
   a.  The name and address of the secured party.
   b.  The name and address of the debtor.
   c.  The social security number of the debtor or, in the case of a debtor doing business other than as an individual, the internal revenue service taxpayer identification number of the debtor.
   d.  A description of the farm products subject to the security interest, the county in Iowa where the farm products are produced or will be produced, the crop year unless every crop of the farm product in question for the duration of the effective financing statement is to be subject to the particular security interest, further details of the farm product subject to the security interest if needed to distinguish it from other quantities of the farm product owned by the same person or persons but not subject to the particular security interest, and other information that the secretary requires to administer this section. The effective financing statement may cover more than one farm product located in more than one county.
   4.  A continuation statement shall be signed by the secured party, identify the original effective financing statement by file number, and state that the original financing statement is still effective.
    Sec. 8.  NEW SECTION.  554E.6  Effective financing statements —— effectiveness.
   The following shall apply to an effective financing statement:

   1.  The effective financing statement shall remain effective for a period of five years from the date of filing, subject to extensions for additional periods of five years each by filing or refiling a continuation statement within six months before the expiration of the five-year period.
   2.  Upon timely filing of a continuation statement, the effectiveness of the original financing statement shall be continued for five years after the last date to which the prior filing was effective, whereupon it shall lapse unless another continuation statement is filed prior to the lapse. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original effective financing statement.
   3.  The effective financing statement shall be amended in writing to reflect a material change within three months of the material change. The amendment shall be signed and filed as required for an original effective financing statement.
   4.  The effective financing statement lapses upon the expiration of the effective period of the effective financing statement or is terminated upon the filing of a statement signed by the secured party that the effective financing statement is terminated.
   a.  If the effective financing statement has not lapsed or is not terminated and there are no outstanding secured obligation and no commitment to make advances, incur obligations, or otherwise give value, the debtor may notify the secured party in writing to terminate the effective financing statement.
   b.  Until the debtor instructs the secured party in writing to terminate the effective financing statement, the secured party has no obligation to terminate the effective financing statement.
   c.  Within thirty days after receipt by the secured party of the statement from the debtor to terminate the effective financing statement, the secured party shall file with the secretary a termination statement with respect to the effective financing statement.
    Sec. 9.  NEW SECTION.  554E.7  Master list —— organization and contents.
   The secretary shall compile the effective financing statements into a master list subject to all of the following:
   1.  The master list shall be organized according to farm products. The master list shall contain information required to be contained in effective financing statements filed with the secretary. The secretary shall arrange the master list for each farm product as follows:
   a.  In alphabetical order according to the last name of the individual debtors or, in the case of debtors doing business other than as individuals, the first word in the name of such debtors.
   b.  In numerical order according to the social security numbers of the individual debtors or, in the case of debtors doing business other than as individuals, the internal revenue service taxpayer identification numbers of the debtors.
   c.  Geographically by county.
   d.  By crop year.
   2.  The master list shall include information regarding buyers who register with the secretary on forms prescribed by the secretary as provided in this section.
   3.  The secretary shall maintain a list of all buyers of farm products who register with the secretary. A buyer registering with the secretary shall complete forms requiring all of the following information, as prescribed by the secretary:
   a.  The name and address of the buyer.
   b.  The interest of the buyer in receiving the list.
   c.  The farm products in which the buyer has an interest.
    Sec. 10.  NEW SECTION.  554E.8  Master list —— distribution and inquiries.
   1.  The secretary shall distribute to each registered buyer a copy in written, printed, or electronic form of those portions of the master list relating to farm products in which the buyer has registered an interest. The secretary may provide for the distribution of the master list or portions of the list on any other medium requested by a registered buyer. If a registered buyer so requests, the information provided to the buyer may be limited to a county or group of counties where the farm product is produced or to a crop year or crop years or to a combination of those identifiers.
   2.  Distribution is subject to all of the following:
   a.  The distribution shall be by first class or electronic mail.
   b.  The secretary shall, by rule, establish the dates upon which the quarterly distributions will be made, the dates after which a filing of an effective financing statement will not be reflected on the next quarterly distribution of lists, and the dates by which a buyer must complete a registration to receive the next quarterly list.
   3.  The secretary shall remove information pertaining to lapsed and terminated effective financing statements from the master list prior to preparation of the lists required to be distributed.
   4.  Upon written notice to the secretary by a registered buyer requesting termination of the distribution of the list to the registered buyer, the secretary shall terminate distribution of the list to the registered buyer.
   5.  Oral and written inquiries by a buyer not registered pursuant to section 554E.7 may be made to the secretary during hours determined by the secretary.
   a.  The secretary may provide for a computerized system for inquiry and confirmation which may be used in lieu of the inquiry and confirmation system otherwise provided for in this section.
   b.  Written confirmation of the information provided orally in response to the inquiry shall be delivered by first class mail or electronic mail to the buyer, at an address provided by the buyer, by the secretary not later than the second regular business day following the day on which the inquiry was received.
   6.  In order to verify the existence or nonexistence of a security interest, a buyer may request a seller to disclose the seller’s social security number or, in the case of a seller doing business other than as an individual, the internal revenue service taxpayer identification number of the seller.
    Sec. 11.  NEW SECTION.  554E.9  Perfection —— creation of superior interests.
   1.  The following shall apply:
   a.  A buyer who is engaged in farming operations and who buys farm products from a seller who is also engaged in farming operations shall take free of a security interest created by the seller, even though the security interest is perfected and the buyer knows of the existence of the security interest.
   b.  Except as provided in this section, a buyer who is not engaged in farming operations and who buys farm products from a seller engaged in farming operations shall take free of a security interest created by the seller, even though the security interest is perfected and the buyer knows of the existence of the security interest.
   2.  As of the date the secretary establishes an electronic central filing system as provided in section 554E.4, the following shall apply:
   a.  If the buyer fails to register with the secretary prior to the purchase of farm products, the buyer takes subject to a security interest in the farm products only if the secured party has filed an effective financing statement that covers the farm products being sold, and the buyer could have discovered the existence of the effective financing statement prior to the purchase by accessing the database containing effective financing statements filed electronically with the secretary.
   b.  If the buyer registers with the secretary prior to the purchase of the farm products, the buyer takes subject to a security interest in the farm products only if the secured party has filed an effective financing statement that covers the farm products being sold, and the buyer does not secure a waiver or release of the security interest as specified in the effective financing statement.
    Sec. 12.  NEW SECTION.  554E.10  Fees.
   The secretary shall establish fees for initially filing effective financing statements, or a statement amending, continuing, or terminating an effective financing statement. The fees shall not be more than provided for filing financing statements as provided in section 554.9525. Notwithstanding section 22.3, the secretary may charge a buyer a fee for registering to receive a master list or for receiving responses to inquiries which are accessed in a printed format. The secretary shall not charge a buyer a fee for registering to receive a master list or for responding to buyer inquiries, including by examining or printing effective financing statements, and statements amending, continuing, or terminating effective financing statements which are accessed in an electronic format. All moneys received by the secretary under this section shall be handled in the same manner as repayment receipts as defined in section 8.2, and shall be used by the secretary exclusively for the administration of this chapter.
    Sec. 13.  DIRECTIONS TO THE SECRETARY OF STATE.  

Notwithstanding the date that all provisions of this Act become applicable, the secretary of state shall adopt rules necessary to implement this Act. If necessary to obtain federal certification of the central filing system, additional or alternative requirements made in conformity with 7 U.S.C. § 1631 may be imposed by the secretary of state by rule.
    Sec. 14.  CONTINGENT APPLICABILITY.  The applicability of the requirements of this Act are contingent upon federal certification of a central filing system as provided in this Act pursuant to 7 U.S.C. § 1631. The provisions of this Act shall apply three months after the date of such certification. The secretary of state shall provide notice of the applicability date in the Iowa administrative bulletin in three consecutive issues prior to the applicability date. Until that date, persons shall take subject to or free of a security interest in the same manner and according to the same procedures applicable immediately prior to the applicability date.
EXPLANATION
   This bill creates a centralized, statewide filing system for security interests in farm products. The system is administered by the secretary of state, who must provide for filing effective financing statements on a statewide basis. The secretary of state must produce a master list of information required to be contained in the effective financing statements. The bill provides requirements for the contents and duration of an effective financing statement. The bill provides for the distribution of information by the secretary of state regarding effective financing statements to interested persons by sending the information to buyers registered with the secretary of state. The bill provides that the secretary of state must establish an electronic system for filing and accessing effective financing statements and related statements.
   The bill authorizes the secretary of state to establish fees for filing effective financing statements. The bill authorizes the secretary of state to establish fees for distributing printed versions of the master list and responding to inquiries.
   The bill provides special contingency and applicability provisions. The secretary of state is required to establish the centralized filing system and obtain federal certification. Once the system is certified, the bill’s provisions become applicable three months after that date. Until that date the current version of the direct notice procedures will continue to apply.