Surety Bond Encyclopedia

Handler of Farm Products Produce Dealers Act Bond - Statewide in California

Brief Summary

A California produce dealer license does not come with a bond by default. CDFA requires one when it has found a financial or compliance problem in the last four years, and the amount is never less than $10,000. Posting the bond is what keeps that license in good standing.

Under California Food and Agricultural Code 56189.5, a produce dealer licensee or applicant must furnish a surety bond when the CDFA director determines that within the preceding four years it showed a lack of financial responsibility, could not otherwise assure future financial responsibility, or violated the Produce Dealers Act in a way that led to license revocation. The bond is the greater of $10,000 or 20 percent of annual dollar volume based on farm product value returned to growers.

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How to Apply for a Handler of Farm Products Produce Dealers Act Bond:

Confirm the CDFA director has required a bond under section 56189.5 or 56133.5 for your license.
Calculate 20 percent of your annual dollar volume based on farm product value returned to growers and compare it to $10,000.
Get the form and final amount the director will accept from the Market Enforcement Branch.
Have the surety issue the bond in the licensee's exact legal name.
Deliver the executed bond to the CDFA Market Enforcement Branch as directed.
Increase the bond within the time set if the director later orders a higher amount.

Detailed Information About the California Handler of Farm Products Produce Dealers Act Bond:

Most licensees never post it

The Produce Dealers Act, Chapter 7 of Division 20 of the Food and Agricultural Code, requires anyone who buys, receives on consignment, solicits for sale on commission or negotiates the sale of farm products from a licensee or producer for resale to be licensed by the California Department of Food and Agriculture. A license alone does not trigger the bond. Section 56189.5 requires it only if, within the preceding four years, the director determines the licensee or applicant engaged in conduct showing a lack of financial responsibility, such as delinquent accounts payable, judgments, insolvency or bankruptcy, failed to assure future financial responsibility without a bond, or violated the chapter in a way that led to license revocation.

How much

The bond is not less than $10,000 or 20 percent of the annual dollar volume of business based on farm product value returned to the grower, whichever is greater. It must be in a form and amount satisfactory to the director. It assures that the business is conducted under the chapter and that the licensee pays all amounts due farm product creditors.

The amount can move

The director may require an increase or allow a reduction based on changes in the nature and volume of the business, but never below $10,000. A licensee told to increase the bond must do so within the time the director sets, or face suspension or revocation after notice and an opportunity for a hearing.

A second way the bond comes up

Section 56133.5 restricts licensees from employing certain agents, such as people whose licenses were revoked or who failed to pay producer claims. The department may approve that employment if the licensee maintains a surety bond satisfactory to the department of not less than $10,000.

Who is outside the Act

Section 56161 exempts, among others, nonprofit cooperative associations handling members' products, processors as defined in section 55407, and retail merchants with a fixed place of business who do not sell at wholesale. CDFA license fees are set by category based on annual dollar volume of California farm product purchases, broker contracts or consignment returns. The Market Enforcement Branch handles licensing and bonds.

Eligibility and Requirements for a California Handler of Farm Products Produce Dealers Act Bond:

California Department of Food and Agriculture as obligee, with form and amount satisfactory to the director.
A minimum of $10,000, or 20 percent of annual volume if greater.
Bond condition assuring payment of all amounts due farm product creditors.
License category and fee based on annual dollar volume.
Books and records kept as required by section 56255.

California Handler of Farm Products Produce Dealers Act Bond FAQs:

Does every produce dealer in California need this bond?

No. Section 56189.5 requires it only when the director determines that within the preceding four years the licensee or applicant showed a lack of financial responsibility, could not otherwise assure future financial responsibility, or committed a violation that led to license revocation.

How is the bond amount calculated?

It is the greater of $10,000 or 20 percent of the annual dollar volume of business based on farm product value returned to the grower. The director can raise or lower it as the business changes, but never below $10,000.

Can a bond let me hire someone whose license was revoked?

Section 56133.5 allows the department to approve employing a restricted agent if the licensee maintains a surety bond satisfactory to the department of at least $10,000.

What if I do not post a higher bond when told to?

The director may suspend or revoke the license after notice and an opportunity for a hearing.

Am I exempt as a processor or retailer?

Section 56161 exempts processors as defined in section 55407 and retail merchants with a fixed place of business, but a retailer loses that exemption if it sells at wholesale farm products bought from a licensee or producer.