Clear TitleProtection for Purchasers of Farms Products

SUMMARY: This document amends regulations relating to the establishment

and management of statewide central filing systems as they pertain

specifically to the filing of ``effective financing statements'' for

``farm products'' as defined in section 1324 of the Food Security Act

of 1985 (7 U.S.C. 1631) by allowing electronic filing of effective

financing statements without the signature of the debtor provided State

law authorizes such a filing. This amendment brings the regulations

into conformity with Sections 662 and 663 of the Federal Agriculture

Improvement and Reform Act of 1996.

DATES: Interim rule effective October 22, 1996. Consideration will be

given only to comments received on or before December 23, 1996.

ADDRESSES: To help ensure that comments are considered, send an

original and three copies to: Industry Analysis Staff, Packers and

Stockyards Programs, Grain Inspection, Packers and Stockyards

Administration, STOP 3647, Room 3052, South Building, 1400 Independence

Avenue S.W., Washington, D.C. 20250-3647. Please state that your

comments refer to the clear title regulations. Comments received may be

inspected at the above address during regular office hours, except

holidays.

FOR FURTHER INFORMATION CONTACT: Gerald E. Grinnell, Director, Industry

Analysis Staff, Grain Inspection Packers and Stockyards Administration,

Room 3052, South Building, Washington, D.C. 20250-3647, 202/720-7455.

Kimberly D. Hart, Esquire, Trade Practices Division, Office of the

General Counsel, Room 2430, South Building, Washington, D.C. 20250-

1400, 202/720-8160.

SUPPLEMENTARY INFORMATION:

Background

Section 1324 of the Food Security Act of 1985 (Pub. L. 99-198) (7

U.S.C. 1631) (hereinafter ``the Act'') provides that certain persons

may be subject to a security interest in a farm product created by the

seller under certain circumstances in which a lender files an

``effective financing statement'' with the ``system operator'' in a

State that has a certified central filing system as defined by the Act.

The Act requires the Secretary of Agriculture to prescribe regulations

``to aid States in the implementation and management of a central

filing system.'' The Grain Inspection, Packers and Stockyards

Administration was delegated with the Secretary's responsibilities

under the Act. Final regulations were published on August 18, 1986 (51

FR 29450).

The Secretary's authority and responsibility under the Act is

limited to certification and prescribing regulations to aid in the

implementation and management of certified central filing systems. The

Act does not give the Secretary the authority or responsibility for

such matters as direct notification by secured parties, sales of and

payment for products, procedures for payment or procedures for personal

liability protection. Those matters are governed by State law. The Act

does not contain any enforcement mechanism for noncompliance with the

Act or its regulations.

Section 662 of the Federal Agriculture Improvement and Reform Act

of 1996 (Pub. L. 104-127) (hereinafter ``the Statute'') amended the Act

and section 663 of the Statute provided that the amendment become

effective upon enactment. The Act was amended because of concerns of

States with certified central filing systems who desired to implement

electronic filing procedures but could not because of the Act's

requirement that the debtor must sign the effective financing

statement. Commercial lenders also expressed concern and confusion due

to the vagueness of the continuation provisions for effective financing

statements included in the Act and its inconsistency with Article IX of

the Uniform Commercial Code.

Prior to the Act's amendment by the Statute, lenders could not

electronically file effective financing statements or amendments to the

effective financing statements with State certified central filing

systems because such statements were required to contain the signature

of the debtor which could not be transmitted electronically. The

amendment contained in the Statute was intended to remedy these

concerns.

The interim rule will allow parties to electronically file

effective financing statements and amendments to effective financing

statements by removing the requirement of the debtor's signature. The

interim rule will also allow States to distribute the master list by

electronic means.

Immediate Action

Section 662 of the Statute amended the Act. Section 663 of the

Statute provided that the amendment become effective upon enactment. It

is therefore necessary to amend the regulations to conform to the

amendment to the Act.

Since prior notice and other public procedures with respect to this

interim rule are impracticable and contrary to the public interest

under these conditions, and because this rule relieves a regulatory

restriction, there is good cause under 5 U.S.C. 553 to make it

effective upon publication. We will consider comments received within

60 days of publication of this interim rule in the Federal Register.

After the comment period closes, we will publish another document in

the Federal Register, including a discussion of any comments we receive

and any amendments we make to the rule as a result of the comments.

Executive Order 12866

The Department of Agriculture is issuing this proposal in

conformance with Executive Order 12866.

Executive Order 12778

This interim rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This action is not intended to have retroactive

effect. This rule would not preempt any State or local laws,

regulations, or policies,

[[Page 54728]]

unless they present an irreconcilable conflict with this rule. There

are no administrative procedures which must be exhausted prior to any

judicial challenge to the provisions of this rule.

Regulatory Flexibility Act and Information Collection

The Administrator, Grain Inspection, Packers and Stockyards

Administration (GIPSA) has determined that this action will not have a

significant economic impact on a substantial number of small entities,

as defined in the Regulatory Flexibility Act, Pub. L. 96-345 (5 U.S.C.

601). Section 1324 of the Food Security Act of 1985 (Pub. L. 99-198 (7

U.S.C. 1631)) (hereinafter ``the Act'') was amended by section 662 of

the Federal Agriculture Improvement and Reform Act of 1996 (hereinafter

``the Statute''). Section 662 of the Statute provides an alternative

means of filing effective financing statements. Therefore, small

entities can choose the filing option that best meets their needs. If

any cost would be incurred by filing electronically, filing paper

documents is still acceptable. Therefore, the Administrator has

determined that this rule will not have a significant economic impact

on a substantial number of small entities.

In compliance with the Paperwork Reduction Act of 1980 (44 U.S.C.

35), the previously approved information collection and recordkeeping

requirements for 9 CFR Part 205 have been previously approved by the

Office of Management and Budget under control number 0590-0004.

List of Subjects in 9 CFR Part 205

Agricultural commodities, Archives and records, Reporting and

recordkeeping requirements.

For reasons set out in the preamble, 9 CFR Part 205 is amended as

set forth below.

PART 205--CLEAR TITLE--PROTECTION FOR PURCHASERS OF FARM PRODUCTS

1. The authority citation for Part 205 is revised to read as

follows:

Authority: Section 1324(I), Pub. L. 99-198, 99 Stat. 1535, 7

U.S.C. 1631; 7 CFR 2.17 (e)(3), 2.56(a)(3), as amended June 17,

1986, 51 FR 22795; Sections 662 and 663, Pub. L. 104-127.

2. Section 205.101 is amended by revising paragraph (b)(11)(iii)

and adding paragraph (e) to read as follows:

Sec. 205.101 Certification-request and processing.

* * * * *

(b) * * *

(11) * * *

(iii) All printed and electronic forms required to be used in

connection with the system.

(c) * * *

(d) * * *

(e) To make changes to an existing certified central filing system,

including changes necessitated or made possible by amendments to the

Act, a written request to amend the existing certified central filing

system must be filed together with such documents as are necessary to

show that the system complies with the Act. The request must contain

relevant new information consistent with the requirements specified

elsewhere in this section.

3. Section 205.105 is amended by revising paragraph (b) to read as

follows:

Sec. 205.105 Master list and portion thereof distributed to

registrants--format.

* * * * *

(b) Section (c)(2)(E) requires the portion to be distributed in

``written or printed form.'' This means recording on paper by any

technology in a form that can be read by humans without special

equipment. The system may, however, honor requests from registrants to

substitute recordings on any medium by any technology including, but

not limited to, electronic recording on tapes or discs in machine-

readable form, and on photographic recording on microfiche. It also

includes, if requested by registrants, electronic transmissions whereby

registrants can print their own paper copies.

* * * * *

4. Section 205.202 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 205.202 ``Effective financing statement'' or EFS.

* * * * *

(b) An EFS may be filed electronically provided a State allows

electronic filing of financing statements without the signature of the

debtor under applicable State law under provisions of the Uniform

Commercial Code or may be a paper document. An electronically filed EFS

need not be a paper document and need not be signed. If an original or

reproduced paper document of an EFS is filed with the State, it must be

signed by both the secured party and the debtor, and be filed by the

secured party.

(c) Countermeasures against mishandling after filing, such as a

requirement that a copy be date stamped and returned to the secured

party, are discretionary with the State. If a State chooses to adopt

such countermeasures, it is responsible for establishing procedures for

recording the date and time when an EFS is received, and for meeting

all legal requirements associated with filing and distributing

information about security interests as required by Sec. 205.101.

5. Section 205.209 is amended by revising paragraph (c) to read as

follows:

Sec. 205.209 Amendment or continuation of EFS.

* * * * *

(c) The amendment must be filed in the same manner as the original

filing. Note the requirement of section (c)(4)(E). The amendment may be

filed electronically provided a State allows electronic filing of

financing statements without the signature of the debtor under

applicable State law under provisions of the Uniform Commercial Code.

An electronically filed amendment need not be signed. However, if an

original or reproduced paper document is filed, the amendment must be

signed by the secured party and the debtor, and be filed by the secured

party.

* * * * *

Dated: October 16, 1996.

David R. Shipman,

Acting Administrator, Grain Inspection, Packers and Stockyards

Administration.

[FR Doc. 96-27050 Filed 10-21-96; 8:45 am]

BILLING CODE 3410-EN-P