2 CSR 60-5.080 - Letters of Credit
(1) A letter
of credit issued by a commercial bank chartered under the laws of Missouri, or
any other state, or chartered pursuant to the National Banking Act, Title 12
U.S.C. may be submitted to the Missouri Department of Agriculture in lieu of a
Missouri grain dealer bond as required by sections 276.401- 276.582, RSMo,
provided that the commercial bank adopts and adheres to the rules enumerated in
the International Chamber of Commerce publication UCP-600
pertaining to letters of credit and issues those letters in conformity with
Article V of the Uniform Commercial Code, section
400.5-101, RSMo. The letter of
credit must be in an amount equal to the otherwise required bond.
(2) The letter of credit shall be irrevocable
and the beneficiary shall be the Missouri Department of Agriculture. Payment
shall be made immediately upon presentment of a sight draft(s) or letter of
demand signed by the director of agriculture or his/her designated
representative, without accompanying supporting documentation.
(3) All letters of credit shall conform to a
required format, unless waived in writing by the director of agriculture. A
standard letter of credit form embodying the required format shall be made
available upon the request of any licensee or prospective licensee. Forms may
be obtained by directing an inquiry to the Division of Grain Inspection and
Warehousing, Missouri Department of Agriculture, P.O. Box 630, Jefferson City,
MO 65102 or by telephone at (573) 751-4112.
(4) A sight draft or letter of demand upon a
letter of credit may be presented for payment only upon the reasons that bond
proceeds may be demanded for disbursement and shall apply to all claims
whenever arising.
(5) Letters of
credit shall have a term of one (1) year which shall be automatically renewable
for additional one- (1-) year terms. A letter of credit may be revoked by the
licensee or issuer only at its expiration date by giving the Department of
Agriculture at least ninety (90) days' written notice, by certified mail, prior
to renewal date. Notice is not deemed sufficiently given unless the director of
agriculture receives the cancellation notice in writing, by certified mail, at
least ninety (90) days prior to the renewal date of the letter of credit. Upon
notice timely received, the licensee shall be required to arrange for
substitution of a suitable bond or certificate of deposit (CD) at least sixty
(60) days prior to the expiration of the letter of credit. If satisfactory
evidence of these arrangements is not timely received, the director shall
proceed in accordance with the provisions of section
276.426, RSMo.
(6) If a licensee desires to surrender its
license and requests the release of a letter of credit, the licensee must
return its grain dealer license and make written request by registered or
certified mail with return receipt for the release of the letter of credit.
Upon receipt of the written request and the submission of the grain dealer
license, the director shall hold the letter of credit until the director is
satisfied that no claims exist, which may include a minimum ninety- (90-) day
holding period, before notice of release is transmitted to the
issuer.
(7) In the event that a
licensee desires to substitute a bond for a letter of credit then in possession
of the director of agriculture, the letter of credit shall remain in force for
a period of ninety (90) days following the later of the effective date of the
bond or the date the bond is received by the director. A substitute bond shall
be considered as received by the director when the bond is actually received or
when a binding verbal commitment for a substitute bond has been accepted by the
director. The director may retain the letter of credit beyond ninety (90) days
for such time as may be required to fully ascertain the existence of any
claims. After that, notice of release shall be transmitted to the issuer of the
letter of credit.
(8) In the event
that a licensee desires to substitute a CD for a letter of credit, the director
shall transmit a release to the issuer of the credit letter upon receipt and
authentication of the CD.
(9) In
the event that a plurality of letters of credit from any number of issuers is
presented in satisfaction of a licensee's bonding obligation, the director may
satisfy claims under the Missouri Grain Dealer's Law by presentment of sight
drafts or letter of demand against one (1) or more letters of credit, without
regard to proration.
(10) A
licensee shall be required to augment letters of credit in any situation where
it would be required to increase its coverage under a bond; this augmentation
shall be commensurate to the increased bond value required. In the event of a
decreased bond requirement, a new letter of credit for the lesser amount may be
substituted for a prior letter upon the renewal date of the letter of credit,
or at such time as approved by the director.
(11) If the decrease in bond requirement is
due to an increase in net worth, a minimum ninety- (90-) day holding period may
be required from the date the improved net worth is accepted by the
director.
(12) Licensees or
prospective licensees may present any combination of CDs, letters of credit,
and bonds in satisfaction of its bonding requirement under this chapter;
however, in making disbursements for claims, the director shall liquidate the
CDs first, draw upon the letters of credit second, and make demand upon a
bond(s) third.
(13) When the
director has made written demand for payment of a letter of credit, the letter
shall be considered paid if the issuing bank, within three (3) days of the
bank's receipt of that demand, pays the sum demanded to the director, the sum
demanded or if the issuing bank deposits, at a bank designated by the director,
in an escrow account solely in the name of the director within three (3) days
of the bank's receipt of that demand. Deposit of the sum demanded in the escrow
account shall not constitute refusal or failure of the issuing bank to pay the
sum demanded to the director and shall prevent a penalty assessment for refusal
or failure to pay the sum demanded to the director. When the sum demanded is
deposited in the escrow account, the funds shall remain in the escrow account
until the liability of the bank has been determined in accordance with sections
276.401- 276.582, RSMo. In the event that a penalty assessment is necessary in
accordance with sections 276.401-276.582, RSMo, this penalty assessment shall
begin on the fourth day following the date of the bank's receipt of written
demand for payment by the director and shall be assessed at the rate of
one-seventh (1/7) of a week for each day of delay.
Notes
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