A COVID-19 relief package passed by Congress Dec. 20 included a bill to create a dealer statutory trust to provide livestock sellers with payment protection during dealer payment defaults.
The Securing All Livestock Equitably Act of 2020, or SALE Act, was introduced into Congress in March by Reps. Roger Marshall (R-KS-1) and Jim Costa (D-CA-16) in the House of Representatives and Sens. Jim Inhofe (R-OK) and Tina Smith (D-MN) in the Senate.
The bill was included in the $900 billion COVID aid package amongst a flurry of other legislation and provisions for agriculture. President Donald Trump was expected to sign the aid package into law, but had not done so before WLJ press time.
“The Livestock Marketing Association (LMA) is grateful for the tremendous leadership of Congress to correct a fundamental unfairness in the current law where livestock sellers often cannot get livestock back when payment does not come through,” said LMA President Larry Schnell. “This is a top priority issue for livestock auctions, which pay producers whether or not we are paid by buyers, and have been devastated by past defaults.”
The bill will ensure producers are paid by requiring dealer trusts. Currently, dealers buy and resell livestock, often grouping them to meet the volume and type needs of their customers, according to the American Farm Bureau Federation. Dealers are able to take possession and pay for them later and do not maintain a trust account to guarantee payment.
The SALE Act amends the Packers and Stockyards Act to create a trust modeled after the existing packer statutory trust. The new language in the act requires all livestock purchased by a dealer in cash sales “shall be held by the dealer in trust for the benefit of all unpaid cash sellers of that livestock until full payment has been received by those unpaid cash sellers.”
The exception to the rule is if a dealer’s average annual purchases does not exceed $100,000.
An unpaid cash seller shall lose the benefit of a trust if the seller has not preserved the trust by providing written notice to the dealer of the intent to keep the benefits of the trust; as well as filing the notice to the secretary of Agriculture no later than 30 days after the final date for making a payment and no later than 15 days after the day the seller receives notice the payment has been dishonored.
A buyer held in trust by a dealer shall receive title to the livestock free of the trust if the buyer receives the livestock in exchange for payment of new value and in good faith and without notice the transfer is a breach of trust.
Transfer of livestock that is held in trust by a dealer will not be considered for new value if the transfer is made for a previous debt or to a secured party in a security agreement.
If the secretary of Agriculture has reason to believe a dealer has failed to honor the trust or believes an enforcement is in the best interest of an unpaid cash seller, then the secretary may take enforcement action. This includes appointing an independent trustee to preserve and enforce a trust; serving as an independent trustee; or bringing civil action in the district court against the dealer. — Anna Miller, WLJ editor
