Print
House Study Bill 142 - IntroducedA Bill ForAn Act 1relating to security interests in farm products, by
2establishing a central filing and notification system,
3providing for fees and their expenditure, and including
4contingent implementation provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 554.9102, subsection 4, Code 2017, is
2amended to read as follows:
34. Federal Food Security Act.
4a. For purposes of the Federal Food Security Act, 7 U.S.C.
5§1631, written notice shall be considered to be received by the
6person to whom it was delivered if the notice is delivered in
7hand to the person, or mailed by certified or registered mail
8with the proper postage and properly addressed to the person to
9whom it was sent. The refusal of a person to whom a notice is
10so mailed to accept delivery of the notice shall be considered
11receipt.
12b. This subsection is repealed on the date that this Act is
13fully implemented as provided in section 554C.14.
14 Sec. 2. Section 554.9320, Code 2017, is amended by adding
15the following new subsection:
16 NEW SUBSECTION. 1A. A buyer of farm products takes subject
17to a security interest in farm products created by the seller
18as provided in chapter 554C.
19 Sec. 3. NEW SECTION. 554C.1 Definitions.
20As used in this chapter, unless the context otherwise
21requires:
221. “Approved unique identifier” means a number, combination
23of numbers and letters, or other identifier selected by the
24secretary as required in section 554C.3.
252. “Buyer” means a buyer in the ordinary course of business,
26a commission merchant, or a selling agent.
273. “Buyer in the ordinary course of business” means a person
28who, in the ordinary course of business, buys farm products
29from a person engaged in farming operations who is in the
30business of selling farm products.
314. “Central filing system” means a system for filing
32effective financing statements, and statements amending,
33continuing, or terminating effective financing statements as
34provided in section 554C.4.
355. “Commission merchant” means a person engaged in the
-1-1business of receiving farm products for sale, on commission, or
2for or on behalf of another person.
36. “Effective financing statement” means a financing
4statement required to be filed as part of the central filing
5system as provided in section 554C.6.
67. “Knows” means having actual knowledge. “Knowledge” means
7actual knowledge.
88. “Secretary” means the secretary of state.
99. “Security interest” means an interest in farm products
10that secures payment or performance of an obligation in the
11same manner as provided in chapter 554.
1210. “Selling agent” means a person, other than a commission
13merchant, who is engaged in the business of negotiating the
14sale and purchase of farm products on behalf of a person
15engaged in farming operations.
16 Sec. 4. NEW SECTION. 554C.2 Special definitions.
17To every extent consistent with the application of federal
18law, unless the context otherwise requires:
191. “Crop year” means the calendar year in which a crop is or
20will be harvested, animals are born or acquired, or poultry or
21eggs are or will be sold.
222. “Debtor” means a person indebted to the secured party and
23subjecting a farm product to a security interest.
243. “Farm products” means the same as defined in section
25554.9102.
264. “Farming operation” means the same as defined in section
27554.9102.
285. “Registered buyer” means a buyer who has registered
29with the secretary pursuant to section 554C.5 to receive a
30master list or portions of a master list as provided in section
31554C.8.
326. “Secured party” means a secured party as defined in
33section 554.9102 in whose favor a security interest in farm
34products is created.
357. “Signature” means to sign, execute, or otherwise adopt a
-2-1symbol, or encrypt or similarly process a record in whole or in
2part, with the present intent of authenticating for purposes of
3identifying the person and adopting or accepting a record.
4 Sec. 5. NEW SECTION. 554C.3 Uniform commercial code —
5federal law — signing documents.
61. This chapter shall be interpreted in conjunction with
7chapter 554, and terms and phrases used in this chapter shall,
8to every extent practicable, be interpreted consistently with
9chapter 554, article 9.
102. The provisions of this chapter including the
11establishment of a central filing system established in section
12554C.4 must comply with applicable requirements set forth in
137 U.S.C. §1631 in order to be certified by the United States
14secretary of agriculture as required in that federal statute.
153. The secretary shall provide for methods of signing
16documents required to be filed with the secretary under this
17chapter, including effective financing statements or statements
18amending, continuing, or terminating effective financing
19statements described in section 554C.6. The secretary shall
20establish a selection system or method approved by the United
21States secretary of agriculture to provide for approved unique
22identifiers.
23 Sec. 6. NEW SECTION. 554C.4 Central filing system —
24establishment.
251. The secretary shall establish and administer a central
26filing system for the filing of effective financing statements
27or statements amending, continuing, or terminating effective
28financing statements as described in section 554C.6 on a
29statewide basis. The central filing system shall provide for
30the electronic filing and examining of the statements.
312. The central filing system shall be designed to allow
32persons to file and examine effective filing statements or
33other statements described in subsection 1 using the internet.
34The secretary may provide for the filing and examining of the
35statements in a paper format.
-3-1 Sec. 7. NEW SECTION. 554C.5 Registered buyers list.
21. The secretary shall maintain a registered buyers list.
32. In order to be registered and be placed on the registered
4buyers list, a buyer must submit a completed form to the
5secretary as prescribed by the secretary. The form shall
6include all of the following:
7a. The name and address of the buyer.
8b. The interest of the buyer in receiving the list.
9c. The farm products in which the buyer has an interest.
10d. Other information that the secretary requires to comply
11with 7 U.S.C. §1631 and to administer this chapter.
12 Sec. 8. NEW SECTION. 554C.6 Effective financing statements
13and related statements — filing requirements.
141. The secretary shall provide for filing of effective
15financing statements, and statements amending, continuing, or
16terminating effective financing statements. The presentation
17of a statement by a secured party and the acceptance of the
18statement by the secretary constitutes filing under this
19section. A statement shall be valid if it substantially
20complies with the requirements of this section and section
21554C.7 even though it contains minor errors that are not
22seriously misleading.
232. An effective financing statement must be an original or
24reproduced copy which is signed by the secured party and the
25debtor. If filed electronically, the debtor is not required to
26sign the effective financing statement. The statement must be
27filed with the secretary by the secured party. The secretary
28shall record the date and hour of the filing of the effective
29financing statement.
303. An effective financing statement must contain all of the
31following:
32a. The name and address of the secured party.
33b. The name and address of the debtor.
34c. The unique approved unique identifier of the debtor.
35d. A description of the farm products subject to the
-4-1security interest, the county in Iowa where the farm products
2are produced or will be produced, the crop year unless
3every crop of the farm product in question for the duration
4of the effective financing statement is to be subject to
5the particular security interest, further details of the
6farm product subject to the security interest if needed to
7distinguish it from other quantities of the farm product owned
8by the same person or persons but not subject to the particular
9security interest, and other information that the secretary
10requires to administer this section. The effective financing
11statement may cover more than one farm product located in more
12than one county.
13e. Other information that the secretary requires to comply
14with 7 U.S.C. §1631 and to administer this chapter.
15 Sec. 9. NEW SECTION. 554C.7 Effective financing statements
16and related statements — effectiveness.
171. An effective financing statement shall remain effective
18for a period of five years from the date of filing, subject to
19extensions for additional periods of five years each by filing
20or refiling a continuation statement within six months before
21the expiration of the five-year period.
222. An effective financing statement shall be amended in
23writing to reflect a material change within three months of the
24material change. The amendment shall be signed and filed as
25required for an original effective financing statement. If the
26statement is filed electronically, the signature of the debtor
27shall not be required.
283. A continuation statement shall be signed by the secured
29party, identify the original effective financing statement by
30file number, and state that the original financing statement
31is still effective.
324. Upon timely filing of a continuation statement, the
33effectiveness of the original financing statement shall be
34continued for five years after the last date to which the prior
35filing was effective, whereupon it shall lapse unless another
-5-1continuation statement is filed prior to the lapse. Succeeding
2continuation statements may be filed in the same manner to
3continue the effectiveness of the original effective financing
4statement.
55. The effective financing statement lapses upon the
6expiration of the effective period of the effective financing
7statement or is terminated upon the filing of a statement
8signed by the secured party that the effective financing
9statement is terminated.
10a. If the effective financing statement has not lapsed or is
11not terminated and there are no outstanding secured obligation
12and no commitment to make advances, incur obligations, or
13otherwise give value, the debtor may notify the secured party
14in writing to terminate the effective financing statement.
15b. Until the debtor instructs the secured party in writing
16to terminate the effective financing statement, the secured
17party has no obligation to terminate the effective financing
18statement.
19c. Within thirty days after receipt by the secured party
20of the statement from the debtor to terminate the effective
21financing statement, the secured party shall file with the
22secretary a termination statement with respect to the effective
23financing statement.
24 Sec. 10. NEW SECTION. 554C.8 Master list — organization
25and contents.
261. The secretary shall compile the effective financing
27statements into a master list.
282. The master list shall be organized according to farm
29products. The master list shall contain information required
30to be contained in effective financing statements filed with
31the secretary. The secretary shall arrange the master list for
32each farm product as follows:
33a. In alphabetical order according to the last name of the
34individual debtors or, in the case of debtors doing business
35other than as individuals, the first word in the name of such
-6-1debtors.
2b. In numerical order according to the approved unique
3identifier of the debtors.
4c. Geographically by county.
5d. By crop year.
63. The master list shall include information regarding
7buyers who register with the secretary under section 554C.5.
84. The master list may include other information that
9the secretary requires to comply with 7 U.S.C. §1631 and to
10administer this chapter.
11 Sec. 11. NEW SECTION. 554C.9 Master list — distribution to
12registered buyers.
131. The secretary shall distribute to each registered buyer
14a copy in written, printed, or electronic form the master list
15or those portions of the master list relating to farm products
16in which the buyer has registered an interest. The secretary
17may provide for the distribution of the master list or portions
18of the list on any other medium requested by a registered
19buyer. If a registered buyer so requests, the information
20provided to the registered buyer may be limited to a county or
21group of counties where the farm product is produced or to a
22crop year or crop years or to a combination of that requested
23information.
242. The secretary shall provide for the distribution of the
25master list or portions of the master list according to the
26following requirements:
27a. The distributions shall be by first class mail or
28electronic mail.
29b. The distributions shall be made on a quarterly basis.
30The secretary shall adopt rules establishing the dates when
31quarterly distributions will be made, the dates after which
32a filing of an effective financing statement will not be
33reflected on the next quarterly distribution, and the date by
34which a buyer must submit a completed registration form to
35receive the next quarterly master list or portion of the master
-7-1list.
23. The secretary shall remove information from the master
3list pertaining to a lapsed or terminated effective financing
4statement from the master list prior to preparation of the
5master list or portions of the master lists for distribution.
64. Upon written notice to the secretary by a registered
7buyer requesting termination of a distribution of the master
8list or a portion of the master list to that registered buyer,
9the secretary shall terminate distribution of the master list
10or a portion of the master list to that registered buyer. The
11secretary may unregister the buyer.
125. In order to verify the existence or nonexistence of a
13security interest, a buyer may request a seller to disclose the
14seller’s approved unique identifier.
15 Sec. 12. NEW SECTION. 554C.10 Inquiries and responses --
16confirmations.
171. a. Oral or written inquiries regarding information
18pertaining to the master list or portions of the master list by
19an unregistered buyer may be made to the secretary during hours
20determined by the secretary.
21b. The secretary shall provide for responses to inquiries
22by unregistered buyers, including a written confirmation
23of the information to such buyers. An oral confirmation
24must be made within twenty-four hours after the inquiry. A
25written confirmation must be delivered by first class mail
26or electronic mail to the unregistered buyer, at an address
27provided by the unregistered buyer, not later than the second
28regular business day following the day on which the secretary
29received the inquiry.
302. The secretary may establish a computerized system for
31receiving and responding to inquiries and the transmission of
32written confirmations.
33 Sec. 13. NEW SECTION. 554C.11 Perfection — creation of
34superior interests.
351. If a buyer registers with the secretary prior to the
-8-1purchase of farm products under section 554C.5, the registered
2buyer takes subject to a security interest in the farm products
3only if all of the following apply:
4a. The secured party has filed an effective financing
5statement under section 554C.7 that covers the farm products
6being sold.
7b. The registered buyer does not secure a waiver or
8release of the security interest as specified in the effective
9financing statement filed by the secured party. If a buyer in
10the ordinary course of business buying farm products identified
11in the master list as provided in section 554C.9 tenders to
12the seller the total purchase price payable to such seller and
13each secured party filing an effective financing statement
14covering the same farm product, an authorization or endorsement
15by the seller and each secured party together with the payment
16shall constitute a waiver or release of the security interest
17specified in the effective financing statement to the extent of
18the amount of the payment. A waiver or release of the security
19interest shall not establish or alter security interest or lien
20priorities under chapter 554 or other Iowa law.
212. If the buyer fails to register with the secretary prior
22to the purchase of farm products, the buyer takes subject
23to a security interest in the farm products only if the
24secured party has filed an effective financing statement that
25covers the farm products being sold, and the buyer could have
26discovered the existence of the effective financing statement
27prior to the purchase by conducting an inquiry of and receiving
28a confirmation by the secretary under section 554C.10.
29 Sec. 14. NEW SECTION. 554C.12 Fees.
301. The secretary shall establish fees for registering as a
31buyer as provided in section 554C.5 and for initially filing
32effective financing statements, or for filing a statement
33amending, continuing, or terminating an effective financing
34statement as provided in sections 554C.6 and 554C.7. The fees
35shall not be more than provided for filing financing statements
-9-1as provided in section 554.9525. However, the secretary shall
2not charge a fee for allowing a person to examine or print
3a buyer’s registration, an effective financing statement, or
4a statement amending continuing, or terminating an effective
5financing statement which is accessible via the internet or
6electronic transmission.
72. Notwithstanding section 22.3, the secretary may charge
8a person a fee to receive a master list distributed pursuant
9to section 554C.9 or for responding to verbal inquiries and
10delivering confirmations pursuant to section 554C.10. However,
11the secretary shall not charge a person a fee to receive a
12master list which is accessible via the internet by electronic
13transmission. The secretary shall not charge a person a fee to
14respond to an inquiry or deliver a confirmation by electronic
15transmission.
163. All moneys received by the secretary under this section
17shall be handled in the same manner as repayment receipts as
18defined in section 8.2, and shall be used by the secretary
19exclusively for the administration of this chapter.
20 Sec. 15. NEW SECTION. 554C.13 Rules and forms.
21The secretary shall adopt all rules and prepare and publish
22all forms required to administer this section and comply with 7
23U.S.C. §1631. The secretary may require the mandatory use of a
24form and refuse to file a document that is not prepared using
25a mandatory form.
26 Sec. 16. NEW SECTION. 554C.14 Full implementation.
271. The secretary shall fully implement this Act only
28upon adequate moneys being appropriated to the secretary
29as determined by the secretary or as otherwise provided in
30statute.
312. If the condition set forth in subsection 1 is satisfied,
32this Act shall be fully implemented on a date certified by
33the secretary which shall not occur until the certification
34is to be published in three consecutive Iowa administrative
35bulletins. The secretary shall deliver each certification for
-10-1publication to the Iowa administrative code editor and the Iowa
2code editor.
33. This section is repealed three years after the date that
4the certification described in subsection 2 is last published
5in the Iowa administrative bulletin.
6 Sec. 17. DIRECTIONS TO THE SECRETARY OF STATE.
71. Notwithstanding the date that all provisions of this
8Act become fully implemented as provided in section 554C.14
9as enacted in this Act, the secretary of state shall adopt
10rules necessary to administer this Act under section 554C.13 as
11enacted in this Act as if it were being fully implemented under
12section 554C.14 as enacted in this Act. The rules shall take
13effect as provided in section 17A.5 on the date that the Act is
14fully implemented as provided in section 554C.14.
152. If necessary to obtain federal certification required
16to implement this Act, the secretary of state may adopt by
17rule additional or alternative requirements than otherwise
18provided in this Act so long as the requirements are made in
19conformity with 7 U.S.C. §1631 and the United States department
20of agriculture. The secretary of state shall describe the
21purpose for the requirements in the preamble to each rule it
22adopts under section 17A.4. The secretary shall also propose
23legislation for consideration by the general assembly meeting
24during the following legislation session. The legislation
25shall be limited to amendments required to comply with
26requirements of 7 U.S.C. §1631 or the United States department
27of agriculture or provisions to improve the administration of
28the Code chapter 554C as enacted in this Act.
29EXPLANATION
30The inclusion of this explanation does not constitute agreement with
31the explanation’s substance by the members of the general assembly.
32ESTABLISHMENT OF CENTRALIZED SYSTEM. This bill creates a
33centralized, statewide filing system for security interests in
34farm products to notify buyers of farm products that a security
35interest has attached to the product. A farm product includes
-11-1a good other than standing timber that is produced as part of a
2farming operation and includes crops, aquatic goods, livestock,
3supplies used or produced on the farming operation or products
4of crops or livestock in an unmanufactured form (Code section
5554.9102). The system must be certified by the United States
6department of agriculture.
7SECURITY INTEREST ATTACHED TO FARM PRODUCTS — FILING
8REQUIREMENTS. The bill allows a person who has a secured
9interest attached to farm products to complete and file a
10document referred to as an effective financing statement or a
11statement amending, continuing, or terminating the effective
12financing statement, with the secretary of state.
13BUYER NOTIFICATION — MASTER LIST. The secretary must
14compile information contained in the effective financing
15statements into a master list organized according to farm
16products which the secretary must regularly distribute to
17buyers of farm products registered with the secretary. A
18registered buyer who receives the master list or a portion of
19the master list is placed on actual or constructive notice
20and therefore takes subject to the security interest. The
21secretary may also respond to verbal or written inquiries by
22buyers including unregistered buyers and deliver a written
23confirmation to inquiring buyers regarding whether a farm
24product is subject to a security interest.
25BUYERS WHO TAKE SUBJECT TO THE SECURITY INTEREST. If a
26buyer registers with the secretary prior to the purchase of
27farm products, the registered buyer takes subject to the
28security interest only if the secured party has filed an
29effective financing statement that covers the farm products
30being sold, unless the registered buyer secures a release of
31the security interest. If a buyer fails to register with the
32secretary, the buyer takes subject to the security interest
33only if the secured party has filed an effective financing
34statement that covers the farm products, and the buyer could
35have discovered the existence of the effective financing
-12-1statement by conducting an inquiry and receiving a response and
2confirmation.
3FEES. The bill authorizes the secretary to establish fees
4for secured parties filing effective financing statements
5and buyers registering with the secretary. The secretary
6may also establish fees for distributing the master list to
7registered buyers and responding to inquiries and delivering
8confirmations. The secretary is prohibited from establishing
9fees for electronic transactions. Moneys received by the
10secretary are considered repayment receipts and must be used to
11administer the provisions of the bill.
12RULES AND FORMS. The secretary is authorized to adopt
13rules and prepare and publish forms and may adopt additional
14or alternative requirements than provided in the bill in order
15to meet requirements for certification by the United States
16department of agriculture.
17CONTINGENT IMPLEMENTATION. The secretary is required to
18fully implement the bill upon meeting two conditions: (1)
19adequate moneys being appropriated to the secretary and (2)
20certification of the system by the United States department
21of agriculture. The date of full implementation occurs on a
22date selected by the secretary but cannot commence until the
23date of implementation is published three times in the Iowa
24administrative bulletin.
25BACKGROUND — GENERAL. The provisions of the bill are
26closely connected with provisions in Code chapter 554, article
279, Iowa’s version of the uniform commercial code governing
28secured transactions. A secured party ordinarily perfects a
29security interest in collateral (personal property) including
30farm products by filing a financing statement (UCC-1) with the
31secretary of state and thereby creating a priority status when
32compared to other secured parties (article 9, part 3). Article
339 provides an exception for buyers in the ordinary course of
34business who generally take free of a security interest created
35by the seller even in cases in which the security interest has
-13-1been perfected and the buyer is aware of its existence (Code
2section 554.9320). However, notwithstanding this exception,
3a buyer who purchases a farm product from a person engaged in
4farming operations may not take free of a security interest.
5The Federal Food Security Act (1985) preempts state’s article
69 requirements by providing that a buyer in the ordinary
7course of business, a commission merchant, or a selling agent
8(all classified under the term “buyer”) may buy farm products
9without being subject to a security interest created by the
10seller. However, the federal law allows a secured party
11to take action to prevent a buyer from taking clear of the
12security interest by following certain steps designed to notify
13buyers.
14BACKGROUND — NOTIFICATION SYSTEMS. The federal law allows
15states to elect between two notification options: (1) Iowa’s
16current system requiring the secured party to deliver direct
17notice to potential buyers of a secured party’s interest in the
18farm products within one year prior to sale or (2) the system
19contemplated in the bill which would establish the central
20notification system. In either case, the federal law does not
21supersede article 9 requirements that govern the filing of a
22filing statement to perfect creditor rights in collateral or
23that establishes priories among creditors.
-14-da/rn
2establishing a central filing and notification system,
3providing for fees and their expenditure, and including
4contingent implementation provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 554.9102, subsection 4, Code 2017, is
2amended to read as follows:
34. Federal Food Security Act.
4a. For purposes of the Federal Food Security Act, 7 U.S.C.
5§1631, written notice shall be considered to be received by the
6person to whom it was delivered if the notice is delivered in
7hand to the person, or mailed by certified or registered mail
8with the proper postage and properly addressed to the person to
9whom it was sent. The refusal of a person to whom a notice is
10so mailed to accept delivery of the notice shall be considered
11receipt.
12b. This subsection is repealed on the date that this Act is
13fully implemented as provided in section 554C.14.
14 Sec. 2. Section 554.9320, Code 2017, is amended by adding
15the following new subsection:
16 NEW SUBSECTION. 1A. A buyer of farm products takes subject
17to a security interest in farm products created by the seller
18as provided in chapter 554C.
19 Sec. 3. NEW SECTION. 554C.1 Definitions.
20As used in this chapter, unless the context otherwise
21requires:
221. “Approved unique identifier” means a number, combination
23of numbers and letters, or other identifier selected by the
24secretary as required in section 554C.3.
252. “Buyer” means a buyer in the ordinary course of business,
26a commission merchant, or a selling agent.
273. “Buyer in the ordinary course of business” means a person
28who, in the ordinary course of business, buys farm products
29from a person engaged in farming operations who is in the
30business of selling farm products.
314. “Central filing system” means a system for filing
32effective financing statements, and statements amending,
33continuing, or terminating effective financing statements as
34provided in section 554C.4.
355. “Commission merchant” means a person engaged in the
-1-1business of receiving farm products for sale, on commission, or
2for or on behalf of another person.
36. “Effective financing statement” means a financing
4statement required to be filed as part of the central filing
5system as provided in section 554C.6.
67. “Knows” means having actual knowledge. “Knowledge” means
7actual knowledge.
88. “Secretary” means the secretary of state.
99. “Security interest” means an interest in farm products
10that secures payment or performance of an obligation in the
11same manner as provided in chapter 554.
1210. “Selling agent” means a person, other than a commission
13merchant, who is engaged in the business of negotiating the
14sale and purchase of farm products on behalf of a person
15engaged in farming operations.
16 Sec. 4. NEW SECTION. 554C.2 Special definitions.
17To every extent consistent with the application of federal
18law, unless the context otherwise requires:
191. “Crop year” means the calendar year in which a crop is or
20will be harvested, animals are born or acquired, or poultry or
21eggs are or will be sold.
222. “Debtor” means a person indebted to the secured party and
23subjecting a farm product to a security interest.
243. “Farm products” means the same as defined in section
25554.9102.
264. “Farming operation” means the same as defined in section
27554.9102.
285. “Registered buyer” means a buyer who has registered
29with the secretary pursuant to section 554C.5 to receive a
30master list or portions of a master list as provided in section
31554C.8.
326. “Secured party” means a secured party as defined in
33section 554.9102 in whose favor a security interest in farm
34products is created.
357. “Signature” means to sign, execute, or otherwise adopt a
-2-1symbol, or encrypt or similarly process a record in whole or in
2part, with the present intent of authenticating for purposes of
3identifying the person and adopting or accepting a record.
4 Sec. 5. NEW SECTION. 554C.3 Uniform commercial code —
5federal law — signing documents.
61. This chapter shall be interpreted in conjunction with
7chapter 554, and terms and phrases used in this chapter shall,
8to every extent practicable, be interpreted consistently with
9chapter 554, article 9.
102. The provisions of this chapter including the
11establishment of a central filing system established in section
12554C.4 must comply with applicable requirements set forth in
137 U.S.C. §1631 in order to be certified by the United States
14secretary of agriculture as required in that federal statute.
153. The secretary shall provide for methods of signing
16documents required to be filed with the secretary under this
17chapter, including effective financing statements or statements
18amending, continuing, or terminating effective financing
19statements described in section 554C.6. The secretary shall
20establish a selection system or method approved by the United
21States secretary of agriculture to provide for approved unique
22identifiers.
23 Sec. 6. NEW SECTION. 554C.4 Central filing system —
24establishment.
251. The secretary shall establish and administer a central
26filing system for the filing of effective financing statements
27or statements amending, continuing, or terminating effective
28financing statements as described in section 554C.6 on a
29statewide basis. The central filing system shall provide for
30the electronic filing and examining of the statements.
312. The central filing system shall be designed to allow
32persons to file and examine effective filing statements or
33other statements described in subsection 1 using the internet.
34The secretary may provide for the filing and examining of the
35statements in a paper format.
-3-1 Sec. 7. NEW SECTION. 554C.5 Registered buyers list.
21. The secretary shall maintain a registered buyers list.
32. In order to be registered and be placed on the registered
4buyers list, a buyer must submit a completed form to the
5secretary as prescribed by the secretary. The form shall
6include all of the following:
7a. The name and address of the buyer.
8b. The interest of the buyer in receiving the list.
9c. The farm products in which the buyer has an interest.
10d. Other information that the secretary requires to comply
11with 7 U.S.C. §1631 and to administer this chapter.
12 Sec. 8. NEW SECTION. 554C.6 Effective financing statements
13and related statements — filing requirements.
141. The secretary shall provide for filing of effective
15financing statements, and statements amending, continuing, or
16terminating effective financing statements. The presentation
17of a statement by a secured party and the acceptance of the
18statement by the secretary constitutes filing under this
19section. A statement shall be valid if it substantially
20complies with the requirements of this section and section
21554C.7 even though it contains minor errors that are not
22seriously misleading.
232. An effective financing statement must be an original or
24reproduced copy which is signed by the secured party and the
25debtor. If filed electronically, the debtor is not required to
26sign the effective financing statement. The statement must be
27filed with the secretary by the secured party. The secretary
28shall record the date and hour of the filing of the effective
29financing statement.
303. An effective financing statement must contain all of the
31following:
32a. The name and address of the secured party.
33b. The name and address of the debtor.
34c. The unique approved unique identifier of the debtor.
35d. A description of the farm products subject to the
-4-1security interest, the county in Iowa where the farm products
2are produced or will be produced, the crop year unless
3every crop of the farm product in question for the duration
4of the effective financing statement is to be subject to
5the particular security interest, further details of the
6farm product subject to the security interest if needed to
7distinguish it from other quantities of the farm product owned
8by the same person or persons but not subject to the particular
9security interest, and other information that the secretary
10requires to administer this section. The effective financing
11statement may cover more than one farm product located in more
12than one county.
13e. Other information that the secretary requires to comply
14with 7 U.S.C. §1631 and to administer this chapter.
15 Sec. 9. NEW SECTION. 554C.7 Effective financing statements
16and related statements — effectiveness.
171. An effective financing statement shall remain effective
18for a period of five years from the date of filing, subject to
19extensions for additional periods of five years each by filing
20or refiling a continuation statement within six months before
21the expiration of the five-year period.
222. An effective financing statement shall be amended in
23writing to reflect a material change within three months of the
24material change. The amendment shall be signed and filed as
25required for an original effective financing statement. If the
26statement is filed electronically, the signature of the debtor
27shall not be required.
283. A continuation statement shall be signed by the secured
29party, identify the original effective financing statement by
30file number, and state that the original financing statement
31is still effective.
324. Upon timely filing of a continuation statement, the
33effectiveness of the original financing statement shall be
34continued for five years after the last date to which the prior
35filing was effective, whereupon it shall lapse unless another
-5-1continuation statement is filed prior to the lapse. Succeeding
2continuation statements may be filed in the same manner to
3continue the effectiveness of the original effective financing
4statement.
55. The effective financing statement lapses upon the
6expiration of the effective period of the effective financing
7statement or is terminated upon the filing of a statement
8signed by the secured party that the effective financing
9statement is terminated.
10a. If the effective financing statement has not lapsed or is
11not terminated and there are no outstanding secured obligation
12and no commitment to make advances, incur obligations, or
13otherwise give value, the debtor may notify the secured party
14in writing to terminate the effective financing statement.
15b. Until the debtor instructs the secured party in writing
16to terminate the effective financing statement, the secured
17party has no obligation to terminate the effective financing
18statement.
19c. Within thirty days after receipt by the secured party
20of the statement from the debtor to terminate the effective
21financing statement, the secured party shall file with the
22secretary a termination statement with respect to the effective
23financing statement.
24 Sec. 10. NEW SECTION. 554C.8 Master list — organization
25and contents.
261. The secretary shall compile the effective financing
27statements into a master list.
282. The master list shall be organized according to farm
29products. The master list shall contain information required
30to be contained in effective financing statements filed with
31the secretary. The secretary shall arrange the master list for
32each farm product as follows:
33a. In alphabetical order according to the last name of the
34individual debtors or, in the case of debtors doing business
35other than as individuals, the first word in the name of such
-6-1debtors.
2b. In numerical order according to the approved unique
3identifier of the debtors.
4c. Geographically by county.
5d. By crop year.
63. The master list shall include information regarding
7buyers who register with the secretary under section 554C.5.
84. The master list may include other information that
9the secretary requires to comply with 7 U.S.C. §1631 and to
10administer this chapter.
11 Sec. 11. NEW SECTION. 554C.9 Master list — distribution to
12registered buyers.
131. The secretary shall distribute to each registered buyer
14a copy in written, printed, or electronic form the master list
15or those portions of the master list relating to farm products
16in which the buyer has registered an interest. The secretary
17may provide for the distribution of the master list or portions
18of the list on any other medium requested by a registered
19buyer. If a registered buyer so requests, the information
20provided to the registered buyer may be limited to a county or
21group of counties where the farm product is produced or to a
22crop year or crop years or to a combination of that requested
23information.
242. The secretary shall provide for the distribution of the
25master list or portions of the master list according to the
26following requirements:
27a. The distributions shall be by first class mail or
28electronic mail.
29b. The distributions shall be made on a quarterly basis.
30The secretary shall adopt rules establishing the dates when
31quarterly distributions will be made, the dates after which
32a filing of an effective financing statement will not be
33reflected on the next quarterly distribution, and the date by
34which a buyer must submit a completed registration form to
35receive the next quarterly master list or portion of the master
-7-1list.
23. The secretary shall remove information from the master
3list pertaining to a lapsed or terminated effective financing
4statement from the master list prior to preparation of the
5master list or portions of the master lists for distribution.
64. Upon written notice to the secretary by a registered
7buyer requesting termination of a distribution of the master
8list or a portion of the master list to that registered buyer,
9the secretary shall terminate distribution of the master list
10or a portion of the master list to that registered buyer. The
11secretary may unregister the buyer.
125. In order to verify the existence or nonexistence of a
13security interest, a buyer may request a seller to disclose the
14seller’s approved unique identifier.
15 Sec. 12. NEW SECTION. 554C.10 Inquiries and responses --
16confirmations.
171. a. Oral or written inquiries regarding information
18pertaining to the master list or portions of the master list by
19an unregistered buyer may be made to the secretary during hours
20determined by the secretary.
21b. The secretary shall provide for responses to inquiries
22by unregistered buyers, including a written confirmation
23of the information to such buyers. An oral confirmation
24must be made within twenty-four hours after the inquiry. A
25written confirmation must be delivered by first class mail
26or electronic mail to the unregistered buyer, at an address
27provided by the unregistered buyer, not later than the second
28regular business day following the day on which the secretary
29received the inquiry.
302. The secretary may establish a computerized system for
31receiving and responding to inquiries and the transmission of
32written confirmations.
33 Sec. 13. NEW SECTION. 554C.11 Perfection — creation of
34superior interests.
351. If a buyer registers with the secretary prior to the
-8-1purchase of farm products under section 554C.5, the registered
2buyer takes subject to a security interest in the farm products
3only if all of the following apply:
4a. The secured party has filed an effective financing
5statement under section 554C.7 that covers the farm products
6being sold.
7b. The registered buyer does not secure a waiver or
8release of the security interest as specified in the effective
9financing statement filed by the secured party. If a buyer in
10the ordinary course of business buying farm products identified
11in the master list as provided in section 554C.9 tenders to
12the seller the total purchase price payable to such seller and
13each secured party filing an effective financing statement
14covering the same farm product, an authorization or endorsement
15by the seller and each secured party together with the payment
16shall constitute a waiver or release of the security interest
17specified in the effective financing statement to the extent of
18the amount of the payment. A waiver or release of the security
19interest shall not establish or alter security interest or lien
20priorities under chapter 554 or other Iowa law.
212. If the buyer fails to register with the secretary prior
22to the purchase of farm products, the buyer takes subject
23to a security interest in the farm products only if the
24secured party has filed an effective financing statement that
25covers the farm products being sold, and the buyer could have
26discovered the existence of the effective financing statement
27prior to the purchase by conducting an inquiry of and receiving
28a confirmation by the secretary under section 554C.10.
29 Sec. 14. NEW SECTION. 554C.12 Fees.
301. The secretary shall establish fees for registering as a
31buyer as provided in section 554C.5 and for initially filing
32effective financing statements, or for filing a statement
33amending, continuing, or terminating an effective financing
34statement as provided in sections 554C.6 and 554C.7. The fees
35shall not be more than provided for filing financing statements
-9-1as provided in section 554.9525. However, the secretary shall
2not charge a fee for allowing a person to examine or print
3a buyer’s registration, an effective financing statement, or
4a statement amending continuing, or terminating an effective
5financing statement which is accessible via the internet or
6electronic transmission.
72. Notwithstanding section 22.3, the secretary may charge
8a person a fee to receive a master list distributed pursuant
9to section 554C.9 or for responding to verbal inquiries and
10delivering confirmations pursuant to section 554C.10. However,
11the secretary shall not charge a person a fee to receive a
12master list which is accessible via the internet by electronic
13transmission. The secretary shall not charge a person a fee to
14respond to an inquiry or deliver a confirmation by electronic
15transmission.
163. All moneys received by the secretary under this section
17shall be handled in the same manner as repayment receipts as
18defined in section 8.2, and shall be used by the secretary
19exclusively for the administration of this chapter.
20 Sec. 15. NEW SECTION. 554C.13 Rules and forms.
21The secretary shall adopt all rules and prepare and publish
22all forms required to administer this section and comply with 7
23U.S.C. §1631. The secretary may require the mandatory use of a
24form and refuse to file a document that is not prepared using
25a mandatory form.
26 Sec. 16. NEW SECTION. 554C.14 Full implementation.
271. The secretary shall fully implement this Act only
28upon adequate moneys being appropriated to the secretary
29as determined by the secretary or as otherwise provided in
30statute.
312. If the condition set forth in subsection 1 is satisfied,
32this Act shall be fully implemented on a date certified by
33the secretary which shall not occur until the certification
34is to be published in three consecutive Iowa administrative
35bulletins. The secretary shall deliver each certification for
-10-1publication to the Iowa administrative code editor and the Iowa
2code editor.
33. This section is repealed three years after the date that
4the certification described in subsection 2 is last published
5in the Iowa administrative bulletin.
6 Sec. 17. DIRECTIONS TO THE SECRETARY OF STATE.
71. Notwithstanding the date that all provisions of this
8Act become fully implemented as provided in section 554C.14
9as enacted in this Act, the secretary of state shall adopt
10rules necessary to administer this Act under section 554C.13 as
11enacted in this Act as if it were being fully implemented under
12section 554C.14 as enacted in this Act. The rules shall take
13effect as provided in section 17A.5 on the date that the Act is
14fully implemented as provided in section 554C.14.
152. If necessary to obtain federal certification required
16to implement this Act, the secretary of state may adopt by
17rule additional or alternative requirements than otherwise
18provided in this Act so long as the requirements are made in
19conformity with 7 U.S.C. §1631 and the United States department
20of agriculture. The secretary of state shall describe the
21purpose for the requirements in the preamble to each rule it
22adopts under section 17A.4. The secretary shall also propose
23legislation for consideration by the general assembly meeting
24during the following legislation session. The legislation
25shall be limited to amendments required to comply with
26requirements of 7 U.S.C. §1631 or the United States department
27of agriculture or provisions to improve the administration of
28the Code chapter 554C as enacted in this Act.
29EXPLANATION
30The inclusion of this explanation does not constitute agreement with
31the explanation’s substance by the members of the general assembly.
32ESTABLISHMENT OF CENTRALIZED SYSTEM. This bill creates a
33centralized, statewide filing system for security interests in
34farm products to notify buyers of farm products that a security
35interest has attached to the product. A farm product includes
-11-1a good other than standing timber that is produced as part of a
2farming operation and includes crops, aquatic goods, livestock,
3supplies used or produced on the farming operation or products
4of crops or livestock in an unmanufactured form (Code section
5554.9102). The system must be certified by the United States
6department of agriculture.
7SECURITY INTEREST ATTACHED TO FARM PRODUCTS — FILING
8REQUIREMENTS. The bill allows a person who has a secured
9interest attached to farm products to complete and file a
10document referred to as an effective financing statement or a
11statement amending, continuing, or terminating the effective
12financing statement, with the secretary of state.
13BUYER NOTIFICATION — MASTER LIST. The secretary must
14compile information contained in the effective financing
15statements into a master list organized according to farm
16products which the secretary must regularly distribute to
17buyers of farm products registered with the secretary. A
18registered buyer who receives the master list or a portion of
19the master list is placed on actual or constructive notice
20and therefore takes subject to the security interest. The
21secretary may also respond to verbal or written inquiries by
22buyers including unregistered buyers and deliver a written
23confirmation to inquiring buyers regarding whether a farm
24product is subject to a security interest.
25BUYERS WHO TAKE SUBJECT TO THE SECURITY INTEREST. If a
26buyer registers with the secretary prior to the purchase of
27farm products, the registered buyer takes subject to the
28security interest only if the secured party has filed an
29effective financing statement that covers the farm products
30being sold, unless the registered buyer secures a release of
31the security interest. If a buyer fails to register with the
32secretary, the buyer takes subject to the security interest
33only if the secured party has filed an effective financing
34statement that covers the farm products, and the buyer could
35have discovered the existence of the effective financing
-12-1statement by conducting an inquiry and receiving a response and
2confirmation.
3FEES. The bill authorizes the secretary to establish fees
4for secured parties filing effective financing statements
5and buyers registering with the secretary. The secretary
6may also establish fees for distributing the master list to
7registered buyers and responding to inquiries and delivering
8confirmations. The secretary is prohibited from establishing
9fees for electronic transactions. Moneys received by the
10secretary are considered repayment receipts and must be used to
11administer the provisions of the bill.
12RULES AND FORMS. The secretary is authorized to adopt
13rules and prepare and publish forms and may adopt additional
14or alternative requirements than provided in the bill in order
15to meet requirements for certification by the United States
16department of agriculture.
17CONTINGENT IMPLEMENTATION. The secretary is required to
18fully implement the bill upon meeting two conditions: (1)
19adequate moneys being appropriated to the secretary and (2)
20certification of the system by the United States department
21of agriculture. The date of full implementation occurs on a
22date selected by the secretary but cannot commence until the
23date of implementation is published three times in the Iowa
24administrative bulletin.
25BACKGROUND — GENERAL. The provisions of the bill are
26closely connected with provisions in Code chapter 554, article
279, Iowa’s version of the uniform commercial code governing
28secured transactions. A secured party ordinarily perfects a
29security interest in collateral (personal property) including
30farm products by filing a financing statement (UCC-1) with the
31secretary of state and thereby creating a priority status when
32compared to other secured parties (article 9, part 3). Article
339 provides an exception for buyers in the ordinary course of
34business who generally take free of a security interest created
35by the seller even in cases in which the security interest has
-13-1been perfected and the buyer is aware of its existence (Code
2section 554.9320). However, notwithstanding this exception,
3a buyer who purchases a farm product from a person engaged in
4farming operations may not take free of a security interest.
5The Federal Food Security Act (1985) preempts state’s article
69 requirements by providing that a buyer in the ordinary
7course of business, a commission merchant, or a selling agent
8(all classified under the term “buyer”) may buy farm products
9without being subject to a security interest created by the
10seller. However, the federal law allows a secured party
11to take action to prevent a buyer from taking clear of the
12security interest by following certain steps designed to notify
13buyers.
14BACKGROUND — NOTIFICATION SYSTEMS. The federal law allows
15states to elect between two notification options: (1) Iowa’s
16current system requiring the secured party to deliver direct
17notice to potential buyers of a secured party’s interest in the
18farm products within one year prior to sale or (2) the system
19contemplated in the bill which would establish the central
20notification system. In either case, the federal law does not
21supersede article 9 requirements that govern the filing of a
22filing statement to perfect creditor rights in collateral or
23that establishes priories among creditors.
-14-da/rn