Clear TitleProtection for Purchasers of Farm Products

DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 205

RIN 0580-AA63

Clear Title--Protection for Purchasers of Farm Products

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Proposed rule.

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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), to allow a continuation of an effective

financing statement to be filed without the signature of the debtor

provided State law authorizes such a filing. This proposal responds to

comments received when the regulations were previously amended by a

final rule published on April 1, 1997 (62 FR 15363) that brought the

regulations into conformity with statutory amendments found in Sections

662 and 663 of the Federal Agriculture Improvement and Reform Act of

1996.

DATES: Comments must be submitted on or before August 7, 1998.

ADDRESSES: To help ensure that comments are considered, send them to:

Economic/ Statistical Support, Packers and Stockyards Programs, Grain

Inspection, Packers and Stockyards Administration, STOP 3647, Room

3052, South Building, 1400 Independence Avenue SW, Washington, D.C.

20250-3647. Comments may also be sent via fax at (202) 690-1266 or via

e-mail at GG[email protected]. 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,

Economic/Statistical Support, Grain Inspection, Packers and Stockyards

Administration, (202) 720-7455. Kimberly D. Hart, Esquire, Trade

Practices Division, Office of the General Counsel, (202) 720-8160.

SUPPLEMENTARY INFORMATION:

Background

Section 1324 of the Food Security Act of 1985 (7 U.S.C. 1631) (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.''

Final regulations were published on August 18, 1986 (51 FR 29450).

The Secretary's authority and responsibility under the Act is

limited to certification of the State central filing systems and to

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.

Prior to the 1996 amendment of the Act, lenders could not file

effective financing statements or amendments to those statements

electronically with State certified central filing systems because such

statements were required to bear the signature of the debtor, which

could not be transmitted electronically. Commercial lenders also

expressed concern and confusion due to the vagueness of the provisions

for effective financing and continuation statements contained in the

Act and the inconsistency between the Act and the Uniform Commercial

Code.

Section 662 of the Federal Agriculture Improvement and Reform Act

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

Act to allow lenders to file ``effective financing statements'' by

electronic transmission without the necessity of obtaining the

signature of the debtor provided State law authorizes such a filing.

The Department published interim and final rules in the Federal

Register to implement the FAIR Act amendments (61 FR 54727 and 62 FR

15363, respectively). The rule allows electronic filing of amendments

to effective financing statements without the signature of the debtor.

Comments received in response to the rule encouraged the Department to

further amend the regulations to allow the filing of paper continuation

statements without the signature of the debtor as well. Section

205.209(d) of the regulations (9 CFR 205.209(d)) currently provides

that continuation statements are to be treated in the same manner as

amendments to effective financing statements. Therefore, the rule

implementing the 1996 FAIR Act amendments allows continuation

statements to be filed electronically, without the signature of the

debtor as well. However, because the purpose of that rule was to bring

the regulations into conformity with the 1996 amendment (which

addressed electronic filings), the final rule did not address the

commentors' request to eliminate the signature requirement for paper

continuation statements.

This proposed rule would remove the requirement from the

regulations that a filing of a continuation to an effective financing

statement bear the signature of the debtor. Section 1324 of the Food

Security Act of 1985 does not require that continuation statements be

signed. The proposed rule would make it easier for lenders to file

continuation statements because lenders would no longer be required to

obtain the signature of the debtor. The proposed rule would also

simplify the filing of lien notices by bringing the regulations for

central filing systems into conformity with Article 9 of the Uniform

Commercial Code, which covers non-farm products.

Executive Order 12866

This rule has been determined to be nonsignificant for the purpose

of Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget.

Executive Order 12988

This proposal has been reviewed under Executive Order 12988, Civil

Justice Reform. This action is not

[[Page 31131]]

intended to have retroactive effect. This rule would not preempt any

State or local laws, regulations, or policies, 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 (5 U.S.C. 601). Few small

entities would be affected. The proposed rule would remove the

requirement from the regulations that a filing of a continuation to an

effective financing statement contain the signature of the debtor. The

proposed rule would make it easier for lenders, few of which are small

entities, to file continuation statements because lenders would no

longer be required to obtain the signature of the debtor. Lenders would

have the option of filing effective financing continuation statements

electronically or in paper form, either without the signature of the

debtor. Furthermore, the proposed rule would also simplify the filing

of lien notices by bringing the regulations for central filing systems

into conformity with Article 9 of the Uniform Commercial Code, which

covers non-farm products. 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 (44 U.S.C. 35), the

information collection and recordkeeping requirements for 9 CFR part

205 have previously been approved by the Office of Management and

Budget under control number 0580-0016.

List of Subjects in 9 CFR Part 205

Agriculture, Central filing system.

For reasons set out in the preamble, the Grain Inspection, Packers

and Stockyards Administration proposes to amend 9 CFR part 205 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: 7 U.S.C. 1631 and 7 CFR 2.22, 2.81.

2. Section 205.209 is amended by revising paragraph (d) to read as

follows:

Sec. 205.209 Amendment or continuation of EFS.

* * * * *

(d) An effective financing statement remains effective for a period

of 5 years from the date of filing and may be continued in increments

of 5-year periods beyond the initial 5-year filing period by refiling

an effective financing statement or by filing a continuation statement

within 6 months before expiration of the effective financing statement.

A continuation statement may be filed electronically or as a paper

document, and need not contain the signature of the debtor.

Dated: June 1, 1998.

James R. Baker,

Administrator, Grain Inspection, Packers and Stockyards Administration.

[FR Doc. 98-15112 Filed 6-5-98; 8:45 am]

BILLING CODE 3410-EN-P