which business was conducted. The number of days in any business year, for purposes of this regulation, shall not exceed 260. Therefore, the divisor (one-half the number of days on which business was conducted) shall not exceed 130. The amount of bond coverage must be the next multiple of $5,000 above the amount so determined. When the computation exceeds $75,000, the amount of bond coverage need not exceed $75,000 plus 10 percent of the excess over $75,000, raised to the next $5,000 multiple. In no case shall the amount of bond coverage be less than $10,000 or such higher amount as required to comply with any State law.

(d) Packer. The amount of bond coverage must be based on the average amount of livestock purchased by the packer during a period equivalent to 2 business days. To compute the required amount of bond coverage, divide the total dollar value of livestock purchased during the preceding business year, or substantial part of that business year, in which the packer did business, by one-half the number of days on which business was conducted. The number of days in any business year, for purposes of this regulation, shall not exceed 260. Therefore, the divisor (one-half the number of days on which business was conducted) shall not exceed 130. The amount of the bond coverage must be the next multiple of $5,000 above the amount so determined. In no case shall the amount of bond coverage for a packer be less than $10,000.

(e) If a person applying for registration as a market agency or dealer has been engaged in the business of handling livestock before the date of the application, the value of the livestock handled, if representative of future operations, must be used in computing the required amount of bond coverage. If the applicant for registration is a successor in business to a registrant formerly subject to these regulations, the amount of bond coverage of the applicant must be at least that amount required of the prior registrant, unless otherwise determined by the Administrator. If a packer becomes subject to these regulations, the value of livestock purchased, if repre

sentative of future operations, must be used in computing the required amount of bond coverage. If a packer is a successor in business to a packer formerly subject to these regulations, the amount of bond coverage of the successor must be at least that amount required of the prior packer, unless otherwise determined by the Administrator.

(f) Whenever the Administrator has reason to believe that a bond is inadequate to secure the performance of the obligations of the market agency, dealer or packer covered thereby, the Administrator shall notify such person to adjust the bond to meet the requirements the Administrator determines to be reasonable.

(7 U.S.C. 204, 228(a))

[48 FR 8806, Mar. 2, 1983]

§ 201.31 Conditions in market agency, dealer and packer bonds.

Each market agency, dealer and packer bond shall contain conditions applicable to the activity or activities in which the person or persons named as principal or clearees in the bond propose to engage, which conditions shall be as follows or in terms to provide equivalent protection:

(a) Condition Clause No. 1: When the principal sells livestock for the accounts of others. If the said principal shall pay when due to the person or persons entitled thereto the gross amount, less lawful charges, for which all livestock is sold for the accounts of others by said principal.

(b) Condition Clause No. 2: When the principal buys livestock for his own account or for the accounts of others. If the said principal shall pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by said principal for his own account or for the accounts of others, and if the said principal shall safely keep and properly disburse all funds, if any, which come into his hands for the purpose of paying for livestock purchased for the accounts of others.

(c) Condition Clause No. 3: When the principal clears other registrants buying livestock and thus is responsible for the obligations of such other

registrants. If the said principal, acting as a clearing agency responsible for the financial obligations of other registrants engaged in buying livestock, viz: (Insert here the names of such other registrants as they appear in the application for registration), or if such other registrants, shall (1) pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by such other registrants for their own account or for the accounts of others; and (2) safely keep and properly disburse all funds coming into the hands of such principal or such other registrants for the purpose of paying for livestock purchased for the accounts of others.

(d) Condition Clause No. 4: When the principal buys livestock for his own account as a packer. If the said principal shall pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by said principal for his own account.

[47 FR 32695, July 29, 1982]

§ 201.32 Trustee in market agency, dealer and packer bonds.

Bonds may be in favor of a trustee who shall be a financially responsible, disinterested person satisfactory to the Administrator. State officials, secretaries or other officers of livestock exchanges or of similar trade associations, attorneys at law, banks and trust companies, or their officers, are deemed suitable trustees. If a trustee is not designated in the bond and action is taken to recover damages for breach of any condition thereof, the Administrator shall designate a person to act as trustee. In those States in which a State official is required by statute to act or has agreed to act as trustee, such official shall be designated by the Administrator as trustee when a designation by the Administrator becomes necessary.

[41 FR 53774, Dec. 9, 1976]

8 201.33 Persons damaged may maintain suit; filing and notification of claims; time limitations; legal expenses. Each bond and each trust fund agreement filed pursuant to the regu

lations in this part shall contain provisions that:

(a) Any person damaged by failure of the principal to comply with any condition clause of the bond or trust fund agreement may maintain suit to recover on the bond or trust fund agreement even though such person is not a party named in the bond or trust fund agreement;

(b) Any claim for recovery on the bond or trust fund agreement must be filed in writing with either the surety, if any, or the trustee, if any, or the Administrator, and whichever of these parties receives such a claim shall notify the other such party or parties at the earliest practicable date;

(c) The Administrator is authorized to designate a trustee pursuant to § 201.32;

(d) The surety on the bond, or the trust fund, as the case may be, shall not be liable to pay any claim if it is not filed in writing within 120 days from the date of the transaction on which the claim is based, or if suit thereon is commenced less than 180 or more than 547 days (which is approximately 18 months) from the date of the transaction on which the claim is based;

(e) The proceeds of the bond, or the trust fund, as the case may be, shall not be used to pay fees, salaries, or expenses, for legal representation of the surety or the principal.

[41 FR 53774, Dec. 9, 1976]

8 201.34 Termination of market agency, dealer and packer bonds.

(a) Each bond shall contain a provision requiring that, prior to terminating such bond, at least 30 days notice in writing shall be given to the Administrator, Packers and Stockyards Administration, U.S. Department of Agriculture, Washington, D.C. 20250, by the party terminating the bond. Such provision may state that in the event the surety named therein writes a replacement bond for the same principal, the 30-day notice requirement may be waived and the bond will be terminated as of the effective date of the replacement bond.

(b) Each bond filed by a market agency who clears other registrants

who are named in the bond shall contain a provision requiring that, prior to terminating the bond coverage of any clearee named therein, at least 30 days notice in writing shall be given to the Administrator, Packers and Stockyards Administration, U.S. Department of Agriculture, Washington, D.C. 20250, by the surety. Such written notice shall be in the form of a rider or endorsement to be attached to the bond of the clearing agency.

(c) Each trust fund agreement shall contain a provision requiring that, prior to terminating such trust fund agreement, at least 30 days notice in writing shall be given to the Administrator, Packers and Stockyards Administration, U.S. Department of Agriculture, Washington, D.C. 20250, by the party terminating the trust fund agreement. Such provision may state that in the event the principal named therein files an acceptable bond written by an approved surety to replace the trust fund agreement, the 30-day notice requirement may be waived and the trust fund agreement will be terminated as of the effective date of the replacement bond.

[47 FR 32695, July 29, 1982]

8 201.35 Letters of credit as bond equivalents.

(a) Any packer, market agency, or dealer required to maintain a surety bond under these regulations may elect to maintain, in whole or partial substitution for such surety bond, one or more irrevocable letters of credit on which a trustee is authorized to draw funds subject to a trust agreement. The amount of such letters of credit, surety bond, trust fund agreement, or combination thereof, must be the total amount of the surety bond otherwise required under these regulations.

(b) Any such letter of credit must be issued by a national bank or a bank insured by the Federal Deposit Insurance Corporation.

(c) The trustee on any such trust agreement must be a person financially responsible, independent of the packer, market agency or dealer, and satisfactory to the Administrator.

(d) Any letter of credit issued pursuant to this section must be received by the trustee authorized to draw funds

on it, and a photographically reproduced copy of such letter of credit, and a fully executed duplicate of such trust agreement, and of any endorsement, rider, amendment, indemnity agreement, or other attachment to such trust agreement, must be filed with the Regional Supervisor for the area of the packer's, market agency's, or dealer's principal place of business.

(e) Such letters of credit and trust agreements to which funds drawn thereunder would be subject must be on the following forms:

(Identification of bank and, if desired, branch, division, department, etc.) IRREVOCABLE TRANSFERABLE STANDBY LETTER OF CREDIT

(if desired:)

Our letter of credit no.This number must be mentioned on all drafts and correspondence. Date:

To: (Identification of Trustee), as Trustee under a certain Trust Agreement, effective on (date), to which (packer, market agency or dealer) is a party, or successor Trustee under the same Trust Agreement.

This credit is transferable, one or more times, but only to a successor Trustee designated by the Packers and Stockyards Administration, United States Department of Agriculture, under the same Trust Agreement. Any such transfer shall govern all rights of the Trustee, including the entire amount which remains available under this credit at the time of such transfer.

Sight draft or drafts should be drawn on us, your draft or drafts drawn at sight bearing the clause, "drawn under (bank) standby letter of credit no.- dated up to the aggregate amount of $——.”

Any such draft must be accompanied by drawer's signed statement, "drawer will dispose of funds received under the accompanying draft in accord with the Trust Agreement effective on (date) to which (packer, market agency or dealer) is a party." We will not be responsible for drawer's disposition of funds received by drawer.

If any such draft is drawn by a successor Trustee under the same Trust Agreement, it must be accompanied by a copy of the letter of the Packers and Stockyards Administration, United States Department of Agriculture, designating such drawer as successor Trustee. We will not be responsible for verifying the authenticity of any such document which appears on its face to be authentic.

Except as otherwise specifically provided herein, any such draft need not be accompanied by any other document.

This credit may not be modified without the written approval of the Administrator, Packers and Stockyards Administration, United States Department of Agriculture. (Either:)

Any such draft must be received by us on or before (expiration date). We hereby agree with drawers, endorsers, and bona fide holders of all drafts drawn hereunder and in compliance herewith that such drafts will be duly honored at sight upon presentation to us. (if desired:) The amount of any draft drawn hereunder must be endorsed on the reverse side of this letter of credit by the negotiating bank, and any such draft must be accompanied by a signed statement that an appropriate notation has been made, or by this letter.

(Or, if desired, the preceding paragraph may read as follows:)

Any such draft must be received by us on or before (expiration date). We hereby agree with drawers of all drafts drawn hereunder and in compliance herewith that such drafts will be duly honored at sight upon presentation to us. (if desired:) This letter must be presented with any such draft, for endorsement of the amount of such draft on the reverse side of this letter.

Except as provided above, this credit is subject to the Uniform Customs and Practice for Documentary Credits (1974 revision), International Chamber of Commerce Publication No. 290.

Authorized Signature.

Now, therefore, the principal has obtained or will obtain, from one or more banks, one or more irrevocable letters of credit, under which the trustee may draw funds from such banks, for the account of the principal, for the following purposes and subject to the following conditions:

APPLICABLE IF PRINCIPAL SELLS ON
COMMISSION

(1) If the principal shall pay when due to the person or persons entitled thereto the gross amount, less lawful charges, for which all livestock is sold for the accounts of others by the principal.

APPLICABLE IF PRINCIPAL BUYS ON
COMMISSION OR AS DEALER

(2) If the principal shall pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by the principal for his own account or for the accounts of others, and if the principal shall safely keep and properly disburse all funds, if any, which come into his hands for the purpose of paying for livestock purchased for the accounts of others.

TRUST AGREEMENT FOR USE WITH ONE OR MORE LETTERS OF CREDIT, IN LIEU OF BOND REQUIRED OF LIVESTOCK MARKET AGENCIES, DEALERS AND PACKERS UNDER THE PACKERS AND STOCKYARDS ACT, 1921, AS AMENDED AND SUPPLEMENTED

Whereas the provisions of the Packers and Stockyards Act, 1921, as amended and supplemented, and the regulations issued thereunder by the Secretary of Agriculture, acting through the Administrator, Packers and Stockyards Administration, United States Department of Agriculture, Washington, D.C. 20250, hereinafter known as the Administrator, require a good and sufficient surety bond or its equivalent of market agencies, dealers, and packers as defined in Isaid Act to cover their obligations as such; and

Whereas hereinafter known as the principal, is engaged in business as a market agency, dealer, or packer as defined in that Act and hereinafter known as the trustee, accepts the obligations of the trustee hereunder;

APPLICABLE IF OTHERS CLEAR THROUGH
PRINCIPAL

(3) If the principal, acting as a clearing agency responsible for the financial obligations of other registrants engaged in buying livestock, viz: (insert here the names of such other registrants as they appear in the application for registration), or if such other registrants shall (1) pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by such other registrants for their own account or for the accounts of others and (2) safely keep and properly disburse all funds coming into the hands of such principal or such other registrants for the purpose of paying for livestock purchased for the accounts of others.

APPLICABLE IF PRINCIPAL BUYS AS A PACKER

(4) If the principal shall pay when due to the person or persons entitled thereto the purchase price of all livestock purchased by the principal for his own account. Conditions and were deleted prior to execution and are not part hereof. If such condition or conditions are met, then funds drawn by the trustee hereunder shall not be liable, but if there shall be any defaults, failures, or neglects under any one

or more of said conditions, then such funds shall be liable, subject to the following terms, conditions and limitations:

(a) Any person damaged by failure of the principal to comply with any condition of this agreement, in a transaction occurring on or after the effective date of this agreement and before the termination date of this agreement in accord with its provisions, may recover under this agreement in accord with and subject to its provisions. Acts, omissions or failures of authorized agents or representatives of the principal or persons whom the principal shall knowingly permit to represent themselves as acting for the principal shall be taken and construed to be acts, omissions or failures of the principal and to be within the protection of this agreement to the same extent and in the same manner as if they were the personal acts of the principal.

(b) The trustee shall not be liable to pay any claim for recovery under this agreement if it is not in writing and received by either the trustee or the Administrator within 120 days from the date of the transaction on which the claim is based. Whichever of these persons receives such a claim shall notify the other such person and the principal at the earliest practicable date.

(c) The trustee, upon determination that funds are due to a claimant, shall draw funds pursuant to a letter of credit obtained by the principal under this agreement, as necessary to pay what is due to the claimant, up to the amount of such letter, and pay such funds to the claimant, except as otherwise provided hereinafter. The trustee, prior to paying any funds to any claimant, shall determine the total amount due to all claimants under this agreement. If such total amount exceeds the total of funds which can be drawn by the trustee under letter(s) of credit obtained by the principal under this agreement, the trustee shall distribute such funds pro rata among the claimants to which funds are due. Payment by the trustee to any such claimant and acceptance by any such claimant of such payment from the trustee shall discharge the trustee, and reduce the amount of funds subject to this agreement, as to such claimant and in the amount of such payment.

(d) If the principal seeks an order of a court to enjoin the honoring of a draft drawn by the trustee, or an order of a court to enjoin payment by the trustee of a claim, or both, the trustee shall notify the claimant and the Administrator. In any such action the trustee shall not be obligated to defend; the claimant at his own expense may defend in the name of the trustee.

(e) Any claimant under this agreement may maintain suit in his own name and at his own expense against the trustee and, if desired, the principal, to recover under this agreement even though such claimant is not

a party named in this agreement, except as provided hereinafter. The trustee shall not be liable to pay any claim for recovery under this agreement if it is not in writing and received by the trustee or the Administrator within 120 days from the date of the transaction on which it is based, or if the claimant commences suit against the trustee thereon in less than 180 or more than 547 days (which is approximately 18 months) of the date of the transaction on which the claim is based. The principal and the trustee hereby waive every defense, if any there be, based on the fact that any such claimant is not a party or privy to this agreement. In any such action brought by a claimant against the trustee, the trustee shall not be obligated to defend; the principal or any other claimant at his own expense may defend in the name of the trustee.

(f) If any draft of the trustee under a letter of credit obtained by the principal under this agreement is not honored by the bank on which it is drawn, the trustee shall notify the claimant and the Administrator. The claimant may at his own expense bring legal action in the name of the trustee to compel payment under the letter of credit to the trustee for disposition under this agreement. The trustee shall not be obligated to prosecute in any such action.

(g) If one irrevocable letter of credit obtained by the principal under this agreement is replaced by another in the same form issued by the same bank under which the trustee can draw the same or a greater amount at the same or a later time than under the former such letter of credit, the trustee may surrender the former in exchange for the latter. In exchange for the entire amount which can be drawn by the trustee under any such letter of credit, the trustee may surrender such letter. The trustee may dispose of any such letter which has expired. The trustee shall not, without written approval of the Administrator, otherwise surrender or dispose of any letter of credit obtained by the principal under this agreement.

(h) If any letter of credit obtained by the principal under this agreement is about to expire and has not been replaced by another in the same form issued by the same bank under which the trustee can draw the same or a greater amount at a later time than under the expiring letter of credit, the trustee, unless the Administrator shall in writing state that this is unnecessary, shall obtain the full amount of such expiring letter of credit before it expires.

(i) This agreement may be terminated by either the trustee or the principal, by delivering, to the other such person and the Administrator, written notice of termination stating or describing a termination date. The termination date shall not be less than