Bill Text: IA SF486 | 2021-2022 | 89th 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 contingent implementation and effective date provisions.(Formerly SSB 1151.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2021-03-10 - Subcommittee: Schultz, Jochum, and Sweeney. S.J. 591. [SF486 Detail]
Download: Iowa-2021-SF486-Introduced.html
Senate
File
486
-
Introduced
SENATE
FILE
486
BY
COMMITTEE
ON
STATE
GOVERNMENT
(SUCCESSOR
TO
SSB
1151)
A
BILL
FOR
An
Act
establishing
a
central
filing
system
relating
to
1
security
interests
in
farm
products,
providing
fees,
and
2
including
contingent
implementation
and
effective
date
3
provisions.
4
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
5
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Section
1.
Section
554.9102,
subsection
4,
Code
2021,
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repealed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
any
of
the
following:
17
a.
A
person
who,
in
the
ordinary
course
of
business,
buys
18
farm
products
from
a
person
engaged
in
farming
operations
who
19
is
in
the
business
of
selling
farm
products.
20
b.
A
commission
merchant.
21
c.
A
selling
agent.
22
2.
“Central
filing
system”
means
a
system
for
filing
23
effective
financing
statements,
and
statements
amending,
24
continuing,
or
terminating
effective
financing
statements,
25
established
under
section
554C.4.
26
3.
“Commission
merchant”
means
a
person
engaged
in
the
27
business
of
receiving
any
farm
product
for
sale,
on
commission,
28
or
for
or
on
behalf
of
another
person.
29
4.
“Crop
year”
means
the
calendar
year
in
which
a
crop
is
or
30
will
be
harvested,
animals
are
born
or
acquired,
or
poultry
or
31
eggs
are
or
will
be
sold.
32
5.
“Effective
financing
statement”
means
a
financing
33
statement
required
to
be
filed
as
part
of
the
central
filing
34
system
as
provided
in
section
554C.6.
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6.
“Secretary”
means
the
secretary
of
state.
1
7.
“Security
interest”
means
an
interest
in
farm
products
2
that
secures
payment
or
performance
of
an
obligation
in
the
3
same
manner
as
provided
in
chapter
554.
4
8.
“Selling
agent”
means
a
person,
other
than
a
commission
5
merchant,
who
is
engaged
in
the
business
of
negotiating
the
6
sale
and
purchase
of
a
farm
product
on
behalf
of
a
person
7
engaged
in
farming
operations.
8
9.
“Signature”
means
a
symbol
used
to
sign,
execute,
or
9
otherwise
adopt
a
record
or
a
process
used
to
encrypt
or
10
similarly
process
a
record,
in
whole
or
in
part,
with
the
11
present
intent
of
authenticating
the
record
for
purposes
of
12
identifying
the
person
adopting
or
accepting
the
record.
13
Sec.
3.
NEW
SECTION
.
554C.2
Special
definitions.
14
To
every
extent
consistent
with
the
application
of
federal
15
law,
unless
the
context
otherwise
requires:
16
1.
“Agricultural
lien”
means
the
same
as
defined
in
section
17
554.9102.
18
2.
“Approved
unique
identifier”
means
a
number,
combination
19
of
numbers
and
letters,
or
other
identifier
selected
by
the
20
secretary
using
a
selection
system
or
method
approved
by
the
21
United
States
secretary
of
agriculture.
22
3.
“Debtor”
means
a
debtor
as
defined
in
section
554.9102
23
who
has
an
interest
other
than
a
security
interest
or
lien
in
a
24
farm
product,
or
any
other
person
who
owns
a
farm
product
and
25
subjects
the
farm
product
to
a
security
interest
whether
or
not
26
that
person
owes
a
debt
to
the
secured
party.
27
4.
“Farm
products”
means
the
same
as
defined
in
section
28
554.9102.
29
5.
“Farming
operation”
means
the
same
as
defined
in
section
30
554.9102.
31
6.
“Secured
party”
means
a
secured
party
as
defined
in
32
section
554.9102
in
whose
favor
a
security
interest
in
farm
33
products
is
created.
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
Sec.
4.
NEW
SECTION
.
554C.3
Chapter
consistent
with
uniform
3
commercial
code.
4
This
chapter
shall
be
interpreted
in
conjunction
with
5
chapter
554,
and
terms
and
phrases
used
in
this
chapter
shall,
6
to
every
extent
practicable,
be
interpreted
consistently
with
7
chapter
554,
article
9.
8
Sec.
5.
NEW
SECTION
.
554C.4
Central
filing
system
——
9
establishment
and
certification.
10
1.
The
secretary
shall
establish
and
administer
a
central
11
filing
system,
which
shall
provide
for
the
electronic
filing
12
and
examining
of
effective
financing
statements
and
statements
13
amending,
continuing,
or
terminating
effective
financing
14
statements
on
a
statewide
basis.
15
2.
The
central
filing
system
shall
be
designed
to
allow
16
persons
to
file
and
examine
effective
financing
statements
17
using
the
internet.
The
secretary
may
provide
for
the
18
filing
and
examining
of
statements
amending,
continuing,
or
19
terminating
effective
financing
statements
in
a
paper
format.
20
3.
The
central
financing
system
must
comply
with
the
21
requirements
set
forth
in
7
U.S.C.
§1631,
and
must
be
certified
22
by
the
United
States
secretary
of
agriculture
prior
to
the
date
23
that
this
Act
is
implemented.
24
Sec.
6.
NEW
SECTION
.
554C.5
Filing
requirements.
25
1.
The
secretary
shall
provide
for
filing
effective
26
financing
statements,
and
statements
amending,
continuing,
or
27
terminating
effective
financing
statements,
as
provided
in
28
this
section.
The
secretary
shall
prescribe
all
forms
to
be
29
used
for
filing.
The
presentation
of
a
statement
for
filing
30
by
a
secured
party
and
the
acceptance
of
the
statement
by
the
31
secretary
constitutes
filing
under
this
section.
32
2.
An
effective
financing
statement
is
valid
if
the
33
statement
substantially
complies
with
the
requirements
of
this
34
section
and
section
554C.6
even
though
it
contains
minor
errors
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that
are
not
seriously
misleading.
1
3.
An
effective
financing
statement
must
be
an
original
or
2
reproduced
copy
which
is
signed
by
the
secured
party
and
the
3
debtor.
If
filed
electronically,
the
debtor
is
not
required
to
4
sign
the
effective
financing
statement.
The
statement
must
be
5
filed
with
the
secretary
by
the
secured
party.
The
secretary
6
shall
record
the
date
and
hour
of
the
filing
of
the
effective
7
financing
statement.
8
4.
An
effective
financing
statement
must
contain
all
of
the
9
following:
10
a.
The
name
and
address
of
the
secured
party.
11
b.
The
name
and
address
of
the
debtor.
12
c.
The
approved
unique
identifier
of
the
debtor.
13
d.
A
description
of
the
farm
products
subject
to
the
14
security
interest,
the
county
in
Iowa
where
the
farm
products
15
are
produced
or
will
be
produced,
the
crop
year
unless
every
16
crop
of
the
farm
product
in
question
for
the
duration
of
17
the
effective
financing
statement
is
to
be
subject
to
the
18
particular
security
interest,
and
further
details
of
the
19
farm
products
subject
to
the
security
interest
if
needed
to
20
distinguish
it
from
other
quantities
of
farm
products
owned
by
21
the
same
person
or
persons
but
not
subject
to
the
particular
22
security
interest.
23
e.
Information
that
the
secretary
requires
to
comply
with
7
24
U.S.C.
§1631
or
to
administer
this
section.
25
5.
The
effective
financing
statement
may
cover
more
than
one
26
farm
product
located
in
more
than
one
county.
27
6.
A
continuation
statement
shall
be
signed
by
the
secured
28
party,
identify
the
original
effective
financing
statement
by
29
file
number,
and
state
that
the
original
financing
statement
30
is
still
effective.
31
Sec.
7.
NEW
SECTION
.
554C.6
Effectiveness.
32
1.
An
effective
financing
statement
shall
remain
effective
33
for
a
period
of
five
years
from
the
date
of
filing,
subject
to
34
extensions
for
additional
periods
of
five
years
each
by
filing
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or
refiling
a
continuation
statement
within
six
months
before
1
the
expiration
of
the
five-year
period.
2
2.
Upon
timely
filing
of
a
continuation
statement,
the
3
effectiveness
of
the
original
financing
statement
shall
be
4
continued
for
five
years
after
the
last
date
to
which
the
prior
5
filing
was
effective,
whereupon
it
shall
lapse
unless
another
6
continuation
statement
is
filed
prior
to
the
lapse.
Succeeding
7
continuation
statements
may
be
filed
in
the
same
manner
to
8
continue
the
effectiveness
of
the
original
effective
financing
9
statement.
10
3.
The
effective
financing
statement
shall
be
amended
in
11
writing
to
reflect
a
material
change
within
three
months
of
the
12
material
change.
The
amendment
shall
be
signed
and
filed
as
13
required
for
an
original
effective
financing
statement.
If
the
14
statement
is
filed
electronically,
the
signature
of
the
debtor
15
shall
not
be
required.
16
4.
a.
The
effective
financing
statement
lapses
upon
the
17
expiration
of
the
effective
period
of
the
effective
financing
18
statement
or
is
terminated
upon
the
filing
of
a
statement
19
signed
by
the
secured
party
that
the
effective
financing
20
statement
is
terminated.
21
b.
If
the
effective
financing
statement
has
not
lapsed
or
is
22
not
terminated
and
there
are
no
outstanding
secured
obligations
23
and
no
commitments
to
make
advances,
incur
obligations,
or
24
otherwise
give
value,
the
debtor
may
notify
the
secured
party
25
in
writing
to
terminate
the
effective
financing
statement.
26
c.
Until
the
debtor
instructs
the
secured
party
in
writing
27
to
terminate
the
effective
financing
statement,
the
secured
28
party
has
no
obligation
to
terminate
the
effective
financing
29
statement.
30
d.
Within
thirty
days
after
receipt
by
the
secured
party
31
of
the
statement
from
the
debtor
to
terminate
the
effective
32
financing
statement,
the
secured
party
shall
file
with
the
33
secretary
a
termination
statement
with
respect
to
the
effective
34
financing
statement.
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Sec.
8.
NEW
SECTION
.
554C.7
Master
list
——
organization
1
and
contents.
2
1.
The
secretary
shall
compile
the
effective
financing
3
statements
into
a
master
list.
4
2.
The
master
list
shall
be
organized
according
to
farm
5
products.
The
master
list
shall
contain
information
required
6
to
be
contained
in
effective
financing
statements
filed
with
7
the
secretary.
The
secretary
shall
arrange
the
master
list
for
8
each
farm
product
as
follows:
9
a.
In
alphabetical
order
according
to
the
last
name
of
the
10
individual
debtors
or,
in
the
case
of
debtors
doing
business
11
other
than
as
individuals,
the
first
word
in
the
name
of
such
12
debtors.
13
b.
In
numerical
order
according
to
the
approved
unique
14
identifier
numbers
of
the
debtors.
15
c.
Geographically
by
county.
16
d.
By
crop
year.
17
3.
The
master
list
shall
include
information
regarding
18
buyers
who
register
with
the
secretary
on
forms
prescribed
by
19
the
secretary
as
provided
in
this
section.
20
4.
The
secretary
shall
maintain
a
list
of
all
buyers
of
farm
21
products
who
register
with
the
secretary.
A
buyer
registering
22
with
the
secretary
shall
complete
forms
requiring
all
of
the
23
following
information,
as
prescribed
by
the
secretary:
24
a.
The
name
and
address
of
the
buyer.
25
b.
The
interest
of
the
buyer
in
receiving
the
list.
26
c.
The
farm
products
in
which
the
buyer
has
an
interest.
27
Sec.
9.
NEW
SECTION
.
554C.8
Master
list
——
distribution
and
28
inquiries.
29
1.
The
secretary
shall
distribute
to
each
registered
buyer
a
30
copy
in
written,
printed,
or
electronic
form
of
those
portions
31
of
the
master
list
relating
to
farm
products
in
which
the
buyer
32
has
registered
an
interest.
The
secretary
may
provide
for
the
33
distribution
of
the
master
list
or
portions
of
the
list
on
any
34
other
medium
requested
by
a
registered
buyer.
If
a
registered
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buyer
so
requests,
the
information
provided
to
the
buyer
may
1
be
limited
to
a
county
or
group
of
counties
where
the
farm
2
products
are
produced
or
to
a
crop
year
or
crop
years
or
to
a
3
combination
of
those
identifiers.
4
2.
Distribution
is
subject
to
all
of
the
following:
5
a.
The
distribution
shall
be
by
first
class
or
electronic
6
mail.
7
b.
The
secretary
shall
adopt
rules
pursuant
to
chapter
17A
8
establishing
the
dates
upon
which
the
quarterly
distributions
9
will
be
made,
the
dates
after
which
a
filing
of
an
effective
10
financing
statement
will
not
be
reflected
on
the
next
quarterly
11
distribution
of
lists,
and
the
dates
by
which
a
buyer
must
12
complete
a
registration
to
receive
the
next
quarterly
list.
13
3.
The
secretary
shall
remove
information
pertaining
to
14
lapsed
and
terminated
effective
financing
statements
from
the
15
master
list
prior
to
preparation
of
the
lists
required
to
be
16
distributed.
17
4.
Upon
written
notice
to
the
secretary
by
a
registered
18
buyer
requesting
termination
of
the
distribution
of
the
19
list
to
the
registered
buyer,
the
secretary
shall
terminate
20
distribution
of
the
list
to
the
registered
buyer.
21
5.
Oral
and
written
inquiries
by
a
buyer
not
registered
22
pursuant
to
section
554C.7
may
be
made
to
the
secretary
during
23
hours
determined
by
the
secretary.
24
a.
The
secretary
may
provide
for
a
computerized
system
25
for
inquiry
and
confirmation
which
may
be
used
in
lieu
of
the
26
inquiry
and
confirmation
system
otherwise
provided
for
in
this
27
section.
28
b.
Written
confirmation
of
the
information
provided
orally
29
in
response
to
the
inquiry
shall
be
delivered
by
first
class
30
mail
or
electronic
mail
to
the
buyer,
at
an
address
provided
31
by
the
buyer,
by
the
secretary
not
later
than
the
second
32
regular
business
day
following
the
day
on
which
the
inquiry
was
33
received.
34
6.
In
order
to
verify
the
existence
or
nonexistence
of
a
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security
interest,
a
buyer
may
request
a
seller
to
disclose
the
1
seller’s
unique
identifier
number.
2
Sec.
10.
NEW
SECTION
.
554C.9
Perfection
——
creation
of
3
superior
interests.
4
1.
If
a
buyer
fails
to
register
with
the
secretary
prior
5
to
the
purchase
of
farm
products,
the
buyer
takes
subject
6
to
a
security
interest
in
the
farm
products
only
if
the
7
secured
party
has
filed
an
effective
financing
statement
that
8
covers
the
farm
products
being
sold,
and
the
buyer
could
have
9
discovered
the
existence
of
the
effective
financing
statement
10
prior
to
the
purchase
by
accessing
the
database
containing
11
effective
financing
statements
filed
electronically
with
the
12
secretary.
13
2.
If
the
buyer
registers
with
the
secretary
prior
to
the
14
purchase
of
the
farm
products,
the
buyer
takes
subject
to
a
15
security
interest
in
the
farm
products
only
if
the
secured
16
party
has
filed
an
effective
financing
statement
that
covers
17
the
farm
products
being
sold,
and
the
buyer
does
not
secure
18
a
waiver
or
release
of
the
security
interest
as
specified
in
19
the
effective
financing
statement
from
the
secured
party.
20
If
a
buyer
in
the
ordinary
course
of
business
buying
farm
21
products
covered
by
the
central
filing
system
as
provided
in
22
section
554C.4
tenders
to
the
seller
the
total
purchase
price
23
by
means
of
a
check
or
any
other
form
of
payment
payable
to
24
such
seller
and
each
security
interest
holder
of
the
seller
25
identified
in
the
central
filing
system
for
such
products
and
26
if
such
security
interest
holder
authorizes
the
negotiation
27
of
such
check
or
other
form
of
payment,
such
authorization
or
28
endorsement
and
payment
thereof
shall
constitute
a
waiver
or
29
release
of
the
security
interest
specified
to
the
extent
of
30
the
amount
of
the
instrument.
Such
waiver
or
release
of
the
31
security
interest
shall
not
serve
to
establish
or
alter
in
any
32
way
security
interest
or
lien
priorities
under
Iowa
law.
33
Sec.
11.
NEW
SECTION
.
554C.10
Fees.
34
1.
The
secretary
shall
establish
fees
for
initially
filing
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an
effective
financing
statement,
or
a
statement
amending,
1
continuing,
or
terminating
an
effective
financing
statement.
2
The
fees
shall
not
be
more
than
provided
for
filing
financing
3
statements
as
provided
in
section
554.9525.
4
2.
The
secretary
may
charge
a
buyer
a
fee
for
registering
to
5
receive
a
master
list
or
for
receiving
responses
to
inquiries
6
which
are
accessed
in
a
printed
format.
The
secretary
shall
7
not
charge
a
buyer
a
fee
for
registering
to
receive
a
master
8
list
or
for
responding
to
buyer
inquiries,
including
by
9
examining
or
printing
effective
financing
statements,
and
10
statements
amending,
continuing,
or
terminating
effective
11
financing
statements
which
are
accessed
in
an
electronic
12
format.
13
3.
All
moneys
received
by
the
secretary
under
this
section
14
shall
be
handled
in
the
same
manner
as
repayment
receipts,
as
15
defined
in
section
8.2,
and
shall
be
used
by
the
secretary
16
exclusively
for
the
administration
of
this
chapter.
17
Sec.
12.
NEW
SECTION
.
554C.11
Rules.
18
The
secretary
shall
adopt
rules
pursuant
to
chapter
17A
19
necessary
or
desirable
to
administer
this
chapter.
20
Sec.
13.
CONTINGENT
IMPLEMENTATION.
21
1.
Except
as
provided
in
subsection
2,
the
provisions
of
22
this
Act
shall
only
be
implemented,
including
administered
and
23
enforced,
on
the
first
business
day
that
occurs
ninety
calendar
24
days
after
federal
certification
of
the
central
filing
system
25
as
provided
in
this
Act
pursuant
to
7
U.S.C.
§1631.
26
2.
The
secretary
of
state
shall
adopt
rules
pursuant
to
27
section
554C.11
necessary
or
desirable
to
implement,
including
28
administer
and
enforce,
the
provisions
of
this
Act
to
be
29
effective
on
the
implementation
date
of
this
Act.
30
a.
To
the
extent
that
the
secretary
of
state
determines
it
31
necessary
to
obtain
federal
certification
of
the
central
filing
32
system
as
provided
in
this
Act
pursuant
to
7
U.S.C.
§1631,
the
33
secretary
of
state
may
adopt
rules
providing
for
a
waiver
or
34
modification
of
a
provision
of
this
Act,
or
may
supplement
a
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provision
of
this
Act.
1
b.
A
rule
adopted
pursuant
to
paragraph
“a”
shall
be
2
rescinded
by
its
own
terms
not
later
than
July
1
of
the
3
legislative
session
succeeding
implementation
of
this
Act.
4
Prior
to
that
legislative
session,
the
secretary
of
state
shall
5
propose
legislation
to
the
general
assembly
necessary
to
comply
6
with
the
certification
requirements
of
7
U.S.C.
§1631.
7
3.
Upon
federal
certification
of
the
central
filing
system
8
as
provided
in
this
Act
pursuant
to
7
U.S.C.
§1631,
the
9
secretary
of
state
shall
provide
notice
of
the
implementation
10
date
in
three
consecutive
issues
of
the
Iowa
administrative
11
bulletin
prior
to
the
implementation
date.
The
secretary
12
of
state
shall
forward
a
copy
of
the
notice
to
the
Iowa
13
Code
editor
prior
to
its
first
publication.
Until
the
14
implementation
date
of
this
Act,
persons
shall
take
subject
to
15
or
free
of
a
security
interest
in
the
same
manner
and
according
16
to
the
same
procedures
applicable
immediately
prior
to
the
17
implementation
date
of
this
Act.
18
Sec.
14.
EFFECTIVE
DATES.
19
1.
Except
as
provided
in
subsection
2,
this
Act
takes
effect
20
July
1,
2022.
21
2.
The
section
of
this
Act
providing
for
the
contingent
22
implementation
of
this
Act
takes
effect
upon
enactment.
23
EXPLANATION
24
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
25
the
explanation’s
substance
by
the
members
of
the
general
assembly.
26
CENTRALIZED
FILING
SYSTEM.
This
bill
creates
a
centralized,
27
statewide
filing
system
(system)
for
security
interests
in
28
farm
products
to
notify
buyers
of
farm
products
subject
to
an
29
attached
security
interest.
Farm
products
include
goods
other
30
than
standing
timber
produced
as
part
of
a
farming
operation
31
and
includes
crops,
aquatic
goods,
livestock,
supplies
used
32
or
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.
The
bill
allows
a
person
who
has
a
secured
1
interest
attached
to
farm
products
to
complete
and
file
a
2
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
The
secretary
must
compile
information
contained
in
the
6
effective
financing
statements
into
a
master
list
organized
7
according
to
farm
products
which
the
secretary
must
regularly
8
distribute
to
buyers
of
farm
products
registered
with
the
9
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
must
27
adopt
rules
as
necessary
to
implement,
administer,
and
enforce
28
the
provisions
of
the
system.
The
system
becomes
effective
on
29
the
first
business
day
occurring
90
days
after
certification
by
30
the
United
States
department
of
agriculture
and
publication
of
31
three
successive
notices
in
the
Iowa
administrative
bulletin.
32
EFFECTIVE
DATES.
The
bill
takes
effect
July
1,
2022,
except
33
for
the
provision
relating
to
contingent
implementation
which
34
takes
effect
upon
enactment.
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BACKGROUND.
Article
9
of
the
UCC
provides
an
exception
for
1
buyers
in
the
ordinary
course
of
business
who
generally
take
2
free
of
a
security
interest
created
by
the
seller
even
in
cases
3
in
which
the
security
interest
has
been
perfected
and
the
buyer
4
is
aware
of
its
existence
(Code
section
554.9320).
However,
5
notwithstanding
this
exception,
a
buyer
who
purchases
a
farm
6
product
from
a
person
engaged
in
farming
operations
may
not
7
take
free
of
a
security
interest.
The
federal
Food
Security
8
Act
of
1985,
in
relevant
part
(7
U.S.C.
§1631),
preempts
the
9
state’s
article
9
requirements
by
providing
that
a
buyer
in
10
the
ordinary
course
of
business,
a
commission
merchant,
or
a
11
selling
agent
(all
classified
under
the
term
“buyer”)
may
buy
12
farm
products
without
being
subject
to
a
security
interest
13
created
by
the
seller
but
only
if
the
buyer
does
not
have
14
actual
or
constructive
notice
of
that
security
interest.
The
15
federal
law
allows
states
to
elect
between
two
notification
16
options:
(1)
Iowa’s
current
law
requiring
the
secured
party
to
17
deliver
direct
notice
to
potential
buyers
of
a
secured
party’s
18
interest
in
the
farm
products
within
one
year
prior
to
sale,
19
or
(2)
the
system
described
in
the
bill.
In
either
case,
the
20
federal
law
does
not
supersede
article
9
requirements
that
21
establish
priorities
among
creditors.
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