Bill Text: IA SSB3078 | 2019-2020 | 88th General Assembly | Introduced
Bill Title: A bill for an act establishing a central filing system relating to security interests in farm products, providing fees, and including applicability, contingent implementation, and effective date provisions.
Spectrum: Committee Bill
Status: (Introduced - Dead) 2020-01-28 - Subcommittee: Brown, Johnson, and Quirmbach. [SSB3078 Detail]
Download: Iowa-2019-SSB3078-Introduced.html
Senate
Study
Bill
3078
-
Introduced
SENATE
FILE
_____
BY
(PROPOSED
COMMITTEE
ON
COMMERCE
BILL
BY
CHAIRPERSON
DAWSON)
A
BILL
FOR
An
Act
establishing
a
central
filing
system
relating
to
1
security
interests
in
farm
products,
providing
fees,
and
2
including
applicability,
contingent
implementation,
and
3
effective
date
provisions.
4
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
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Section
1.
Section
554.9102,
subsection
4,
Code
2020,
is
1
amended
to
read
as
follows:
2
4.
Federal
Food
Security
Act.
3
a.
For
purposes
of
the
Federal
Food
Security
Act,
7
U.S.C.
4
§1631,
written
notice
shall
be
considered
to
be
received
by
the
5
person
to
whom
it
was
delivered
if
the
notice
is
delivered
in
6
hand
to
the
person,
or
mailed
by
certified
or
registered
mail
7
with
the
proper
postage
and
properly
addressed
to
the
person
to
8
whom
it
was
sent.
The
refusal
of
a
person
to
whom
a
notice
is
9
so
mailed
to
accept
delivery
of
the
notice
shall
be
considered
10
receipt.
11
b.
This
subsection
is
repealed
on
the
date
that
this
Act
is
12
implemented
as
provided
in
this
Act.
13
Sec.
2.
NEW
SECTION
.
554C.1
Definitions.
14
As
used
in
this
chapter,
unless
the
context
otherwise
15
requires:
16
1.
“Buyer”
means
a
person
who,
in
the
ordinary
course
of
17
business,
buys
farm
products
from
a
person
engaged
in
farming
18
operations
who
is
in
the
business
of
selling
farm
products.
A
19
buyer
includes
a
commission
merchant
or
selling
agent.
20
2.
“Central
filing
system”
means
a
system
for
filing
21
effective
financing
statements,
and
statements
amending,
22
continuing,
or
terminating
effective
financing
statements,
23
established
under
section
554C.4.
24
3.
“Commission
merchant”
means
a
person
engaged
in
the
25
business
of
receiving
any
farm
product
for
sale,
on
commission,
26
or
for
or
on
behalf
of
another
person.
27
4.
“Crop
year”
means
the
calendar
year
in
which
a
crop
is
or
28
will
be
harvested,
animals
are
born
or
acquired,
or
poultry
or
29
eggs
are
or
will
be
sold.
30
5.
“Effective
financing
statement”
means
a
financing
31
statement
required
to
be
filed
as
part
of
the
central
filing
32
system
as
provided
in
section
554C.6.
33
6.
“Secretary”
means
the
secretary
of
state.
34
7.
“Security
interest”
means
an
interest
in
farm
products
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that
secures
payment
or
performance
of
an
obligation
in
the
1
same
manner
as
provided
in
chapter
554.
2
8.
“Selling
agent”
means
a
person,
other
than
a
commission
3
merchant,
who
is
engaged
in
the
business
of
negotiating
the
4
sale
and
purchase
of
a
farm
product
on
behalf
of
a
person
5
engaged
in
farming
operations.
6
9.
“Signature”
means
to
sign,
execute,
or
otherwise
adopt
a
7
symbol
or
to
encrypt
or
similarly
process
a
record,
in
whole
or
8
in
part,
with
the
present
intent
of
authenticating
the
record
9
for
purposes
of
identifying
the
person
adopting
or
accepting
10
the
record.
11
Sec.
3.
NEW
SECTION
.
554C.2
Special
definitions.
12
To
every
extent
consistent
with
the
application
of
federal
13
law,
unless
the
context
otherwise
requires:
14
1.
“Agricultural
lien”
means
the
same
as
defined
in
section
15
554.9102.
16
2.
“Debtor”
means
a
debtor
as
defined
in
section
554.9102
17
who
has
an
interest
other
than
a
security
interest
or
lien
in
a
18
farm
product,
or
any
other
person
who
owns
a
farm
product
and
19
subjects
the
farm
product
to
a
security
interest
whether
or
not
20
that
person
owes
a
debt
to
the
secured
party.
21
3.
“Farm
products”
means
the
same
as
defined
in
section
22
554.9102.
23
4.
“Farming
operation”
means
the
same
as
defined
in
section
24
554.9102.
25
5.
“Secured
party”
means
a
secured
party
as
defined
in
26
section
554.9102
in
whose
favor
a
security
interest
in
farm
27
products
is
created.
28
6.
“Security
interest”
means
an
interest
in
farm
products
29
that
secures
payment
or
performance
of
an
obligation
in
the
30
same
manner
as
provided
in
chapter
554.
31
7.
“Unique
identifier”
means
a
number,
combination
of
32
numbers
and
letters,
or
other
identifier
selected
by
the
33
secretary
using
a
selection
system
or
method
approved
by
the
34
United
States
secretary
of
agriculture.
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Sec.
4.
NEW
SECTION
.
554C.3
Chapter
interpreted
in
1
conjunction
with
uniform
commercial
code.
2
This
chapter
shall
be
interpreted
in
conjunction
with
3
chapter
554,
and
terms
and
phrases
used
in
this
chapter
shall,
4
to
every
extent
practicable,
be
interpreted
consistently
with
5
chapter
554,
article
9.
6
Sec.
5.
NEW
SECTION
.
554C.4
Central
filing
system
——
7
establishment
and
certification.
8
1.
The
secretary
shall
establish
and
administer
a
central
9
filing
system,
for
filing
and
examining
of
effective
financing
10
statements
and
statements
amending,
continuing,
or
terminating
11
effective
financing
statements.
12
2.
The
central
filing
system
shall
be
designed
to
allow
13
persons
to
file
and
examine
statements
described
in
subsection
14
1
using
the
internet.
The
secretary
may
provide
for
the
filing
15
and
examining
of
the
statements
in
a
paper
format.
16
3.
The
central
financing
system
must
comply
with
the
17
requirements
set
forth
in
7
U.S.C.
§1631,
and
must
be
certified
18
by
the
United
States
secretary
of
agriculture
prior
to
the
date
19
that
this
Act
is
implemented.
20
Sec.
6.
NEW
SECTION
.
554C.5
Filing
requirements.
21
1.
The
secretary
shall
provide
for
filing
effective
22
financing
statements,
and
statements
amending,
continuing,
or
23
terminating
effective
financing
statements,
as
provided
in
this
24
section.
The
secretary
shall
prescribe
all
forms
to
be
used
25
for
filing.
The
presentation
of
a
statement
for
filing
and
the
26
acceptance
of
the
statement
by
the
secretary
constitutes
filing
27
under
this
section.
28
2.
An
effective
financing
statement
is
valid
if
the
29
statement
substantially
complies
with
the
requirements
of
this
30
section
even
though
it
contains
minor
errors
that
are
not
31
seriously
misleading.
32
3.
An
effective
financing
statement
must
be
an
original
or
33
reproduced
copy
which
is
signed
by
the
secured
party
and
the
34
debtor.
If
filed
electronically,
the
debtor
is
not
required
to
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sign
the
effective
financing
statement.
The
statement
must
be
1
filed
with
the
secretary
by
the
secured
party.
The
secretary
2
shall
record
the
date
and
hour
of
the
filing
of
the
effective
3
financing
statement.
4
4.
An
effective
financing
statement
must
contain
all
of
the
5
following:
6
a.
The
name
and
address
of
the
secured
party.
7
b.
The
name
and
address
of
the
debtor.
8
c.
The
unique
identifier
of
the
debtor.
9
d.
A
description
of
the
farm
products
subject
to
the
10
security
interest,
the
county
in
Iowa
where
the
farm
products
11
are
produced
or
will
be
produced,
the
crop
year
unless
every
12
crop
of
the
farm
product
in
question
for
the
duration
of
13
the
effective
financing
statement
is
to
be
subject
to
the
14
particular
security
interest,
and
further
details
of
the
15
farm
products
subject
to
the
security
interest
if
needed
to
16
distinguish
it
from
other
quantities
of
farm
products
owned
by
17
the
same
person
or
persons
but
not
subject
to
the
particular
18
security
interest.
19
e.
Information
that
the
secretary
requires
to
comply
with
7
20
U.S.C.
§1631
or
to
administer
this
section.
21
5.
The
effective
financing
statement
may
cover
more
than
one
22
farm
product
located
in
more
than
one
county.
23
6.
A
continuation
statement
shall
be
signed
by
the
secured
24
party,
identify
the
original
effective
financing
statement
by
25
file
number,
and
state
that
the
original
financing
statement
26
is
still
effective.
27
Sec.
7.
NEW
SECTION
.
554C.6
Effectiveness.
28
1.
An
effective
financing
statement
shall
remain
effective
29
for
a
period
of
five
years
from
the
date
of
filing,
subject
to
30
extensions
for
additional
periods
of
five
years
each
by
filing
31
or
refiling
a
continuation
statement
within
six
months
before
32
the
expiration
of
the
five-year
period.
33
2.
Upon
timely
filing
of
a
continuation
statement,
the
34
effectiveness
of
the
original
financing
statement
shall
be
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continued
for
five
years
after
the
last
date
to
which
the
prior
1
filing
was
effective,
whereupon
it
shall
lapse
unless
another
2
continuation
statement
is
filed
prior
to
the
lapse.
Succeeding
3
continuation
statements
may
be
filed
in
the
same
manner
to
4
continue
the
effectiveness
of
the
original
effective
financing
5
statement.
6
3.
The
effective
financing
statement
shall
be
amended
in
7
writing
to
reflect
a
material
change
within
three
months
of
the
8
material
change.
The
amendment
shall
be
signed
and
filed
as
9
required
for
an
original
effective
financing
statement.
If
the
10
statement
is
filed
electronically,
the
signature
of
the
debtor
11
shall
not
be
required.
12
4.
a.
The
effective
financing
statement
lapses
upon
the
13
expiration
of
the
effective
period
of
the
effective
financing
14
statement
or
is
terminated
upon
the
filing
of
a
statement
15
signed
by
the
secured
party
that
the
effective
financing
16
statement
is
terminated.
17
b.
If
the
effective
financing
statement
has
not
lapsed
or
is
18
not
terminated
and
there
are
no
outstanding
secured
obligations
19
and
no
commitments
to
make
advances,
incur
an
obligation,
or
20
otherwise
give
value,
the
debtor
may
notify
the
secured
party
21
in
writing
to
terminate
the
effective
financing
statement.
22
c.
Until
the
debtor
instructs
the
secured
party
in
writing
23
to
terminate
the
effective
financing
statement,
the
secured
24
party
has
no
obligation
to
terminate
the
effective
financing
25
statement.
26
d.
Within
thirty
days
after
receipt
by
the
secured
party
27
of
the
statement
from
the
debtor
to
terminate
the
effective
28
financing
statement,
the
secured
party
shall
file
with
the
29
secretary
a
termination
statement
with
respect
to
the
effective
30
financing
statement.
31
Sec.
8.
NEW
SECTION
.
554C.7
Master
list
——
organization
32
and
contents.
33
1.
The
secretary
shall
compile
the
effective
financing
34
statements
into
a
master
list.
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2.
The
master
list
shall
be
organized
according
to
farm
1
products.
The
master
list
shall
contain
information
required
2
to
be
contained
in
effective
financing
statements
filed
with
3
the
secretary.
The
secretary
shall
arrange
the
master
list
for
4
each
farm
product
as
follows:
5
a.
In
alphabetical
order
according
to
the
last
name
of
the
6
individual
debtors
or,
in
the
case
of
debtors
doing
business
7
other
than
as
individuals,
the
first
word
in
the
name
of
such
8
debtors.
9
b.
In
numerical
order
according
to
the
unique
identifiers
10
of
the
debtors.
11
c.
Geographically
by
county.
12
d.
By
crop
year.
13
3.
The
master
list
shall
include
information
regarding
14
buyers
who
register
with
the
secretary
on
forms
prescribed
by
15
the
secretary
as
provided
in
this
section.
16
4.
The
secretary
shall
maintain
a
list
of
all
buyers
of
farm
17
products
who
register
with
the
secretary.
A
buyer
registering
18
with
the
secretary
shall
complete
forms
requiring
all
of
the
19
following
information,
as
prescribed
by
the
secretary:
20
a.
The
name
and
address
of
the
buyer.
21
b.
The
interest
of
the
buyer
in
receiving
the
list.
22
c.
The
farm
products
in
which
the
buyer
has
an
interest.
23
Sec.
9.
NEW
SECTION
.
554C.8
Master
list
——
distribution
and
24
inquiries.
25
1.
The
secretary
shall
distribute
to
each
registered
buyer
a
26
copy
in
written,
printed,
or
electronic
form
of
those
portions
27
of
the
master
list
relating
to
farm
products
in
which
the
buyer
28
has
registered
an
interest.
The
secretary
may
provide
for
the
29
distribution
of
the
master
list
or
portions
of
the
list
on
any
30
other
medium
requested
by
a
registered
buyer.
If
a
registered
31
buyer
so
requests,
the
information
provided
to
the
buyer
may
32
be
limited
to
a
county
or
group
of
counties
where
the
farm
33
products
are
produced
or
to
a
crop
year
or
crop
years
or
to
a
34
combination
of
those
identifiers.
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2.
Distribution
is
subject
to
all
of
the
following:
1
a.
The
distribution
shall
be
by
first
class
or
electronic
2
mail.
3
b.
The
secretary
shall
adopt
rules
pursuant
to
chapter
17A
4
establishing
the
dates
upon
which
the
quarterly
distributions
5
will
be
made,
the
dates
after
which
a
filing
of
an
effective
6
financing
statement
will
not
be
reflected
on
the
next
quarterly
7
distribution
of
lists,
and
the
dates
by
which
a
buyer
must
8
complete
a
registration
to
receive
the
next
quarterly
list.
9
3.
The
secretary
shall
remove
information
pertaining
to
10
lapsed
and
terminated
effective
financing
statements
from
the
11
master
list
prior
to
preparation
of
the
lists
required
to
be
12
distributed.
13
4.
Upon
written
notice
to
the
secretary
by
a
registered
14
buyer
requesting
termination
of
the
distribution
of
the
15
list
to
the
registered
buyer,
the
secretary
shall
terminate
16
distribution
of
the
list
to
the
registered
buyer.
17
5.
Oral
and
written
inquiries
by
a
buyer
not
registered
18
pursuant
to
section
554C.7
may
be
made
to
the
secretary
during
19
hours
determined
by
the
secretary.
20
a.
The
secretary
may
provide
for
a
computerized
system
21
for
inquiry
and
confirmation
which
may
be
used
in
lieu
of
the
22
inquiry
and
confirmation
system
otherwise
provided
for
in
this
23
section.
24
b.
Written
confirmation
of
the
information
provided
orally
25
in
response
to
the
inquiry
shall
be
delivered
by
first
class
26
mail
or
electronic
mail
to
the
buyer,
at
an
address
provided
27
by
the
buyer,
by
the
secretary
not
later
than
the
second
28
regular
business
day
following
the
day
on
which
the
inquiry
was
29
received.
30
6.
In
order
to
verify
the
existence
or
nonexistence
of
a
31
security
interest,
a
buyer
may
request
a
seller
to
disclose
the
32
seller’s
unique
identifier.
33
Sec.
10.
NEW
SECTION
.
554C.9
Perfection
——
creation
of
34
superior
interests.
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1.
If
a
buyer
fails
to
register
with
the
secretary
prior
1
to
the
purchase
of
farm
products,
the
buyer
takes
subject
2
to
a
security
interest
in
the
farm
products
only
if
the
3
secured
party
has
filed
an
effective
financing
statement
that
4
covers
the
farm
products
being
sold,
and
the
buyer
could
have
5
discovered
the
existence
of
the
effective
financing
statement
6
prior
to
the
purchase
by
accessing
the
database
containing
7
effective
financing
statements
filed
electronically
with
the
8
secretary.
9
2.
If
the
buyer
registers
with
the
secretary
prior
to
the
10
purchase
of
the
farm
products,
the
buyer
takes
subject
to
a
11
security
interest
in
the
farm
products
only
if
the
secured
12
party
has
filed
an
effective
financing
statement
that
covers
13
the
farm
products
being
sold,
and
the
buyer
does
not
secure
14
a
waiver
or
release
of
the
security
interest
as
specified
in
15
the
effective
financing
statement
from
the
secured
party.
16
If
a
buyer
in
the
ordinary
course
of
business
buying
farm
17
products
covered
by
the
central
filing
system
as
provided
in
18
section
554C.4
tenders
to
the
seller
the
total
purchase
price
19
by
means
of
a
check
or
any
other
form
of
payment
payable
to
20
such
seller
and
each
security
interest
holder
of
the
seller
21
identified
in
the
central
filing
system
for
such
products
and
22
if
such
security
interest
holder
authorizes
the
negotiation
23
of
such
check
or
other
form
of
payment,
such
authorization
or
24
endorsement
and
payment
thereof
shall
constitute
a
waiver
or
25
release
of
the
security
interest
specified
to
the
extent
of
26
the
amount
of
the
instrument.
Such
waiver
or
release
of
the
27
security
interest
shall
not
serve
to
establish
or
alter
in
any
28
way
security
interest
or
lien
priorities
under
Iowa
law.
29
Sec.
11.
NEW
SECTION
.
554C.10
Fees.
30
1.
The
secretary
shall
establish
fees
for
initially
filing
31
an
effective
financing
statement,
and
for
filing
a
statement
32
amending,
continuing,
or
terminating
an
effective
financing
33
statement.
The
fees
shall
not
be
more
than
provided
for
filing
34
financing
statements
as
provided
in
section
554.9525.
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2.
a.
Except
as
provided
in
paragraph
“b”
,
the
secretary
1
may
charge
a
buyer
a
fee
for
registering
to
receive
a
master
2
list
or
for
receiving
responses
to
inquiries
which
are
accessed
3
in
a
printed
format.
4
b.
The
secretary
shall
not
charge
a
buyer
a
fee
for
5
registering
to
receive
a
master
list
or
for
responding
to
6
buyer
inquiries,
including
by
examining
or
printing
effective
7
financing
statements,
and
statements
amending,
continuing,
or
8
terminating
effective
financing
statements
which
are
accessed
9
in
an
electronic
format.
10
3.
All
moneys
received
by
the
secretary
under
this
section
11
shall
be
handled
in
the
same
manner
as
repayment
receipts,
as
12
defined
in
section
8.2,
and
shall
be
used
by
the
secretary
13
exclusively
for
the
administration
of
this
chapter.
14
Sec.
12.
NEW
SECTION
.
554C.11
Rules.
15
The
secretary
shall
adopt
rules
pursuant
to
chapter
17A
16
necessary
or
desirable
to
administer
this
chapter.
17
Sec.
13.
DIRECTIONS
TO
THE
SECRETARY
OF
STATE.
18
Notwithstanding
the
date
that
all
provisions
of
this
Act
19
become
applicable,
the
secretary
of
state
shall
adopt
rules
20
necessary
to
implement
this
Act.
If
necessary
to
obtain
21
federal
certification
of
the
central
filing
system,
additional
22
or
alternative
requirements
made
in
conformity
with
7
U.S.C.
23
§291631
may
be
imposed
by
the
secretary
of
state
by
rule.
The
24
additional
or
alternative
requirements
shall
expire
not
later
25
than
July
1
of
the
succeeding
legislative
session.
26
Sec.
14.
CONTINGENT
IMPLEMENTATION.
27
1.
The
provisions
of
chapter
554C,
as
enacted
in
this
Act,
28
shall
only
be
implemented,
including
administered,
by
the
29
secretary
of
state,
beginning
ninety
days
after
the
publication
30
date
of
the
edition
of
the
Iowa
administrative
bulletin
that
31
includes
a
statement
by
the
secretary
of
state
verifying
all
32
of
the
following:
33
a.
The
secretary
of
state
has
adequate
funding
to
establish
34
and
administer
the
central
filing
system
as
established
in
this
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Act.
1
b.
The
central
financing
system
as
established
in
this
2
Act
has
been
certified
by
the
United
States
secretary
of
3
agriculture
as
provided
in
7
U.S.C.
§1631.
4
2.
The
secretary
of
state
shall
forward
a
copy
of
the
5
statement
described
in
subsection
1
to
the
Iowa
Code
editor
6
prior
to
publication
in
the
Iowa
administrative
bulletin.
7
3.
The
secretary
of
state
shall
provide
notice
describing
8
the
implementation
of
this
Act
in
three
consecutive
editions
of
9
the
Iowa
administrative
bulletin
prior
to
the
implementation
10
date
of
this
Act
as
provided
in
subsection
1.
11
4.
Until
the
implementation
date
of
this
Act
a
person
shall
12
take
subject
to
or
free
of
a
security
interest
in
farm
products
13
in
the
same
manner
and
according
to
the
same
procedures
14
applicable
immediately
prior
to
this
Act’s
implementation
date.
15
Sec.
15.
EFFECTIVE
DATE.
This
Act,
being
deemed
of
16
immediate
importance,
takes
effect
upon
enactment.
17
EXPLANATION
18
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
19
the
explanation’s
substance
by
the
members
of
the
general
assembly.
20
GENERAL.
This
bill
provides
for
credit
transactions
21
involving
agricultural
goods
which
include
crops
(e.g.,
grain)
22
and
other
farm
products
governed
by
Iowa’s
version
of
the
23
Uniform
Commercial
Code
(UCC),
Code
chapter
554,
by
regulating
24
the
commercial
relationships
existing
between
debtors,
25
creditors,
and
buyers.
26
CENTRALIZED
FILING
SYSTEM.
The
bill
creates
a
centralized
27
filing
system
(system)
for
security
interests
in
farm
products
28
to
notify
buyers
of
farm
products
subject
to
an
attached
29
security
interest.
Farm
products
include
goods
other
than
30
standing
timber
produced
as
part
of
a
farming
operation
and
31
includes
crops,
aquatic
goods,
livestock,
supplies
used
or
32
produced
on
the
farming
operation,
or
products
of
crops
or
33
livestock
in
an
unmanufactured
form
(Code
section
554.9102).
34
The
system
must
be
certified
by
the
United
States
department
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of
agriculture
(USDA).
The
bill
allows
a
person
who
has
a
1
secured
interest
attached
to
farm
products
to
complete
and
file
2
a
document
referred
to
as
an
effective
financing
statement
3
or
a
statement
amending,
continuing,
or
terminating
the
4
effective
financing
statement,
with
the
secretary
of
state
5
(secretary).
The
secretary
must
compile
information
contained
6
in
the
effective
financing
statements
into
a
master
list
7
organized
according
to
farm
products
which
the
secretary
must
8
regularly
distribute
to
buyers
of
farm
products
registered
with
9
the
secretary.
The
secretary
may
also
respond
to
verbal
or
10
written
inquiries
by
buyers
including
unregistered
buyers
and
11
deliver
a
written
confirmation
to
inquiring
buyers
regarding
12
whether
a
farm
product
is
subject
to
a
security
interest.
If
13
a
buyer
registers
with
the
secretary
prior
to
the
purchase
14
of
farm
products,
the
registered
buyer
takes
subject
to
the
15
security
interest
only
if
the
secured
party
has
filed
an
16
effective
financing
statement
that
covers
the
farm
products
17
being
sold,
unless
the
registered
buyer
secures
a
release
of
18
the
security
interest.
If
a
buyer
fails
to
register
with
the
19
secretary,
the
buyer
takes
subject
to
the
security
interest
20
only
if
the
secured
party
has
filed
an
effective
financing
21
statement
that
covers
the
farm
products,
and
the
buyer
could
22
have
discovered
the
existence
of
the
effective
financing
23
statement
by
conducting
an
inquiry
and
receiving
a
response
and
24
confirmation.
The
bill
authorizes
the
secretary
to
establish
25
fees
for
secured
parties
filing
effective
financing
statements
26
and
buyers
registering
with
the
secretary.
The
secretary
27
must
adopt
rules
as
necessary
to
implement
and
administer
the
28
provisions
of
the
system.
The
system
becomes
effective
90
days
29
after
the
publication
date
of
the
Iowa
administrative
bulletin
30
that
includes
a
statement
by
the
secretary
verifying
that
(1)
31
the
secretary
has
adequate
funding
to
implement
and
administer
32
the
centralized
filing
system
and
(2)
the
centralized
filing
33
system
has
been
certified
by
USDA.
34
BACKGROUND.
Article
9
of
the
UCC
provides
an
exception
for
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buyers
in
the
ordinary
course
of
business
who
generally
take
1
free
of
a
security
interest
created
by
the
seller
even
in
cases
2
in
which
the
security
interest
has
been
perfected
and
the
buyer
3
is
aware
of
its
existence
(Code
section
554.9320).
However,
4
notwithstanding
this
exception,
a
buyer
who
purchases
a
farm
5
product
from
a
person
engaged
in
farming
operations
may
not
6
take
free
of
a
security
interest.
The
federal
Food
Security
7
Act
of
1985,
in
relevant
part
(7
U.S.C.
§1631),
preempts
the
8
state’s
article
9
requirements
by
providing
that
a
buyer
in
9
the
ordinary
course
of
business,
a
commission
merchant,
or
a
10
selling
agent
(all
classified
under
the
term
“buyer”)
may
buy
11
farm
products
without
being
subject
to
a
security
interest
12
created
by
the
seller
but
only
if
the
buyer
does
not
have
13
actual
or
constructive
notice
of
that
security
interest.
The
14
federal
law
allows
states
to
elect
between
two
notification
15
options:
(1)
Iowa’s
current
law
requiring
the
secured
party
to
16
deliver
direct
notice
to
potential
buyers
of
a
secured
party’s
17
interest
in
the
farm
products
within
one
year
prior
to
sale,
18
or
(2)
the
system
described
in
the
bill.
In
either
case,
the
19
federal
law
does
not
supersede
article
9
requirements
that
20
establish
priorities
among
creditors.
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