7 CFR 1427.1083 - Bonding requirements for net worth.

§ 1427.1083 Bonding requirements for net worth.

(a) A bond furnished by a warehouseman under this subpart must meet the following requirements:

(1) Such bond must be executed by a surety which:

(i) Has been approved by the U.S. Treasury Department, and

(ii) Maintains an officer or representative authorized to accept service of legal process and in the State where the warehouse is located.

(2) Such bond must be on the Warehouseman's Bond form, except that a bond furnished under State law (statutory bond) or under operational rules of nongovernmental supervisory agencies may be accepted in an equivalent amount as a substitute for a bond running directly to CCC if:

(i) CCC determines that such bond provides adequate protection to CCC.

(ii) It has been executed by a surety specified in paragraph (a) of this section or has a blanket rider and endorsement executed by such a surety with the liability of the surety under such rider or endorsement being the same as that of the surety under the original bond, and

(iii) It is noncancellable for not less than ninety (90) days or includes a rider providing for not less than ninety (90) days' notice to CCC before cancellation. Excess coverage on a substitute bond for one warehouse will not be accepted or applied by CCC against insufficient bond coverage on other warehouses.

(3) Cash and negotiable securities offered by a warehouseman may be accepted by CCC in lieu of the equivalent amount of required bond coverage. Any such cash or negotiable securities accepted by CCC will be returned to the warehouseman when the period for which coverage was required has ended and there appears to CCC to be no liability under the storage agreement.

(4) A legal liability insurance policy may be accepted by CCC in lieu of the required amount of bond coverage provided such policy contains a clause or rider making the policy payable to CCC, CCC determines that it affords protection equivalent to a bond, and the Office of the General Counsel, U.S. Department of Agriculture, approves it for legal sufficiency.

(5) An irrevocable letter of credit may be accepted by CCC in lieu of the required amount of bond coverage provided that the issuing bank is a commercial bank insured by the Federal Deposit Insurance Corporation. Such standby letter of credit must be on the Irrevocable Letter of Credit form, or on such other form as may be specifically approved by the Director, KCCO, or the Director's designee.

(b) [Reserved]

[ 44 FR 67085, Nov. 23, 1979, as amended by Amdt. 3, 50 FR 16455, Apr. 26, 1985; 80 FR 138, Jan. 2, 2015]

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