Settlement – Other Resources to Assure Financial Performance of the U.S. Buyer

Beyond the bank deposits and net assets of the elevator company, what other resources are available to assure financial performance of the U.S. buyer?

U.S. grain elevators, because they provide storage services, are generally required to have a
warehouse license to conduct business. This warehouse license may be issued by either the
federal U.S. government or the state government. There are specific requirements under
either state or federal law for: 1) net worth for the business; 2) bonding requirements to
cover storage obligations (warehouse receipts or scale tickets or other evidence of
producer-owned grain stored in the facility); and in some cases, 3) an indemnity fund has
been established in a state to cover any other additional losses on storage obligations. The
federal warehouse licensing program does not have any indemnity fund, and relies only on
net worth and bonding to cover losses.

With respect to grain that is sold to the elevator, if the business becomes illiquid financially,
and thus unable to make the payment good, some states have a grain merchandising
license (sometimes called a grain dealer license). The federal government has no
merchandising licensing requirements for facilities. Under state law, merchandising (grain
dealer) regulations generally require a separate merchandising bond; sometimes require
additional net worth for the business, and some states have indemnity funds that can cover
a portion of potential losses on grain sold.

Sellers of Canadian grain to buyers in the U.S. should refer to the statutes of the U.S. state where the buyer resides.  Sellers of Canadian grain into the U.S. should be aware that for grain that is sold in the U.S., but not paid for (deferred or delayed payment), such grain is generally considered as having had title passed at the time of the initiation of the DP contract, and the seller is considered an unsecured creditor if the matter comes before a bankruptcy court. Specific laws that apply in individual states may have slight variations from what is the typical situation described here.

For example, relevant license requirements for grain buyers and storage providers can be
found at:
1. U.S. Department of Agriculture, Warehouse Act regarding grain storage:
http://www.fsa.usda.gov/FSA/webapp?area=home&subject=coop&topic=was-ua
2. Idaho: www.agri.idaho.gov
3. Michigan Department of Agriculture: www.michigan.gov/mdard/
4. Minnesota Department of Agriculture: www.mda.state.mn.us/
5. Montana Department of Agriculture: www.agr.mt.gov/
6. Washington Department of Agriculture: www.agr.wa.gov/

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