Livestock Market Agencies Dealers & Packers (Clause 1 - Sells on commission) Bond - USDA in All States
Table of Contents
Brief Summary
A livestock auction cannot sell a single head on commission until the Packers and Stockyards Division has a Clause 1 bond on file in the right amount. A surety bond lets the market meet that requirement for an annual premium instead of tying up cash in a trust fund agreement, and the executed PSD 2000 form goes straight to the regional office with the registration application.
Every market agency that sells livestock on commission for others must file and keep a Clause 1 bond with USDA's Packers and Stockyards Division under 9 CFR 201.29. The amount is not a flat figure. It is calculated from the market's own sales volume under 9 CFR 201.30, with a $10,000 minimum, and a state may require more. The bond guarantees that consignors are paid the gross proceeds of their livestock, less lawful charges.
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How to Apply for a Livestock Market Agencies Dealers & Packers (Clause 1 - Sells on commission) Bond:
- Register with the Packers and Stockyards Division on form PSD 1000 before operating as a market.
- Calculate the bond amount from last year's livestock sales divided by sale days, or confirm the figure with your PSD regional office.
- Check whether your state sets a higher minimum than the federal $10,000 floor.
- Have the surety complete form PSD 2000 with Clause 1 selected, then sign it as principal.
- Name a trustee on the bond if your state requires a state official to serve as trustee.
- File the executed bond with the PSD regional office for your headquarters state and wait for written notice that registration is effective.
Detailed Information About the All States Livestock Market Agencies Dealers & Packers (Clause 1 - Sells on commission) Bond:
Who needs a Clause 1 bond
Under the Packers and Stockyards Act, a person who sells livestock in commerce on behalf of consignors is a market agency selling on commission. In practice that is the sale barn or auction market. Each one must file and maintain its own bond under 9 CFR 201.29(c). A market cannot rely on another firm's bond for its selling side.
If the same business also buys livestock on commission or as a dealer, that buying activity needs a separate Clause 2 bond. The regulation is explicit that selling and buying operations are covered by separate bonds, and the AMS bonding guidance repeats that a Clause 1 bond must stand alone.
How the amount is calculated
The bond amount varies by market. Under 9 CFR 201.30(a), take the dollar value of livestock sold during the preceding business year and divide it by the actual number of sale days, using no more than 130 days as the divisor. Round up to the next multiple of $5,000. If the result is over $50,000, the bond need not exceed $50,000 plus 10 percent of the amount above $50,000, again rounded up to the next $5,000.
The floor is $10,000, or a higher figure if your state requires one. A new market that has handled livestock before uses that history if it reflects future operations. A successor business must carry at least the bond the prior registrant was required to carry unless the Administrator decides otherwise. The Administrator can also order an increase at any time if the bond looks inadequate.
What the bond guarantees
Condition Clause No. 1 in 9 CFR 201.31(a) promises that the market will pay, when due, the gross amount for which livestock is sold for others, less lawful charges. Anyone damaged can sue on the bond even if they are not named in it. Claims must be filed in writing within 60 days of the transaction, and suit must be started no sooner than 120 days and no later than 547 days after the transaction under 9 CFR 201.33.
Filing
The surety completes form PSD 2000, the principal signs it, and the market files it with the PSD regional office covering the state where the business is headquartered, together with the PSD 1000 Application for Registration. The name on the bond must match the registration exactly. PSD will not process the registration until an acceptable bond is on file, and you must wait for written notice that registration is effective before operating. The surety must be on the Treasury list of companies approved for bonds to the United States, and at least 30 days written notice to AMS is required before the bond can be cancelled.
Cost
The premium is an annual percentage of the bond amount set by the surety after reviewing the owner's credit and the market's finances. Collateral may be required. AMS also accepts a trust fund agreement or a letter of credit pledged to a trust agreement in place of all or part of the surety bond.
Eligibility and Requirements for an All States Livestock Market Agencies Dealers & Packers (Clause 1 - Sells on commission) Bond:
- Surety company currently approved by the U.S. Treasury for bonds executed to the United States.
- Bond amount computed under 9 CFR 201.30(a), never less than $10,000.
- Market's own Clause 1 bond, kept separate from any Clause 2 bond for buying activity.
- Principal name on the bond matching the PSD registration exactly.
- At least 30 days written notice to AMS before the bond is terminated.
- Owner credit and financial review by the surety. Collateral may be requested.
All States Livestock Market Agencies Dealers & Packers (Clause 1 - Sells on commission) Bond FAQs:
It depends on your sales. Divide the dollar value of livestock sold last business year by the number of sale days, capped at 130, and round up to the next $5,000. Above $50,000 the bond need not exceed $50,000 plus 10 percent of the excess. The minimum is $10,000, or more if state law requires it. Your PSD regional office can confirm the figure.
No. Under 9 CFR 201.29(b), a firm that sells on commission and also buys on commission or as a dealer must file separate bonds for the selling and buying sides. Selling is covered by a Clause 1 bond and buying by a Clause 2 bond.
No. PSD will not process your registration until it has an acceptable, fully executed bond in the required amount. Wait for written notice that your registration is effective before conducting business.
A written claim must be filed with the surety, trustee or the Administrator within 60 days of the transaction. Any lawsuit on the bond must be filed between 120 and 547 days after the transaction.
Yes. AMS accepts a trust fund agreement backed by deposited funds or U.S. obligations, or a trust agreement backed by an irrevocable standby letter of credit, alone or combined with a surety bond, as long as the total equals the required amount.
