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Expert Surety Bonds Since 2004
Need assistance? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Expert Surety Bonds Since 2004
A packer bond is sized to what you actually buy, so the number changes as your kill grows. Once annual livestock purchases pass $500,000, USDA expects a Clause 4 bond on file before you keep buying. A surety bond lets you meet that obligation for a premium instead of locking up cash or a letter of credit in a trust account.
Under 9 CFR 201.29(d), every packer purchasing livestock must file and maintain a reasonable bond with USDA, except packers whose annual purchases do not exceed $500,000. The packer bond uses Condition Clause No. 4 and guarantees the packer will pay when due the purchase price of all livestock bought for its own account. The amount equals two business days of average livestock purchases, rounded up to the next $5,000, with a $10,000 minimum.
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Under 9 CFR 201.29(d), every packer purchasing livestock, directly or through an affiliate, employee or wholly owned subsidiary, must file and maintain a reasonable bond, except packers whose annual purchases do not exceed $500,000. When a packer uses a subsidiary or affiliate to buy, that buyer registers as a packer buyer and the parent maintains the bond. Packer buyers registered as dealers to purchase livestock for slaughter only are excluded from filing their own bond under 201.29(a).
There is no flat amount. Under 9 CFR 201.30(d), coverage is based on the average livestock purchased during a period equal to 2 business days. Divide the total dollar value of livestock purchased during the preceding business year by one half the number of days on which business was conducted. A business year counts no more than 260 days, so the divisor never exceeds 130. Round up to the next multiple of $5,000. The bond can never be less than $10,000, and there is no maximum.
A packer that is new to the rules uses its purchase volume, if representative of future operations, to compute the bond. A successor to a bonded packer must carry at least the prior packer's amount unless the Administrator decides otherwise. If the Administrator believes a bond is inadequate, the packer will be told to adjust it under 201.30(f).
Condition Clause No. 4 in 9 CFR 201.31(d) applies when the principal buys livestock for its own account as a packer. The AMS instructions for Form PSD 2000 say each type of operation, defined by its condition clause, requires a separate surety bond. A company that also operates as a dealer or market agency needs a separate bond for that activity.
The bond is written on Form PSD 2000 by a surety approved by the U.S. Treasury Department for bonds executed to the United States, as 9 CFR 201.27(a) requires. A power of attorney dated on or before the bond's effective date must be attached. The executed bond goes to the Packers and Stockyards Division regional office covering the state where the business is headquartered.
A packer may instead use a bond equivalent, either a trust fund agreement or a trust agreement backed by an irrevocable standby letter of credit, or a combination with a surety bond, under 201.27(b).
The surety guarantees the packer will pay sellers when due. AMS says payment for livestock is due before the close of the next business day following purchase and transfer of possession. A seller who is not paid files a written claim with the surety or the Administrator within 60 days of the transaction, and any suit must be started between 120 and 547 days after the transaction under 201.33(d). The surety pays valid claims up to the bond amount and the packer must repay the surety.
The bond sits alongside the packer trust. If a packer fails to pay, receivables, inventories and proceeds from cash purchases become trust assets for unpaid cash sellers by operation of law.
The premium is set by the surety based on the bond amount and a review of the company's financial statements, credit and payment history. The bond amount is the surety's limit, not what you pay.
Under 201.34(a), at least 30 days written notice must be given to the AMS Administrator before the bond is terminated, unless the same surety writes a replacement bond.
Not if annual livestock purchases do not exceed $500,000. Above that, 9 CFR 201.29(d) requires a packer to file and maintain a reasonable bond or bond equivalent.
Divide last business year's livestock purchases by one half the days you did business, with the divisor capped at 130. Round up to the next $5,000. The minimum is $10,000 and there is no maximum.
No. The PSD 2000 instructions say each type of operation, defined by its condition clause, requires a separate surety bond. Clause 4 covers packer buying only.
Yes. Under 9 CFR 201.27(b) a packer may use a trust fund agreement or a trust agreement backed by an irrevocable standby letter of credit, in whole or part, in place of the surety bond. The total must still equal the required bond amount.
A written claim must be filed within 60 days from the date of the transaction. Suit on the bond must be started no sooner than 120 days and no later than 547 days from the transaction.
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