Bill 4591

                    Current Status

Bill Number:               4591
Ratification Number:       518
Act Number                 436
Introducing Body:          House
Subject:                   State warehouse system

(A436, R518, H4591)

AN ACT TO AMEND TITLE 39, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 22 SO AS TO REGULATE THE STATE WAREHOUSE SYSTEM; BY ADDING SECTION 39-22-35 SO AS TO EXEMPT GRIST MILLS AND THEIR PRODUCTS FROM REGULATION OF THE STATE WAREHOUSE SYSTEM; AND TO REPEAL CHAPTER 21 OF TITLE 39 RELATING TO THE STATE'S AGRICULTURAL WAREHOUSES.

Be it enacted by the General Assembly of the State of South Carolina:

State warehouse system

SECTION 1. Title 39 of the 1976 Code is amended by adding:

Section 39-22-10. The department may license a qualified warehouse facility for the storage of cotton and grain or other nonperishable agricultural products as defined by regulation. A license must be granted only to those applicants who have met the minimum requirements of this chapter and whose warehouse facility is suitable for the storage of agricultural commodities for which it is intended. A license may be revoked or suspended at any time the warehouseman does not meet the minimum standards as required by this chapter.

Section 39-22-20. To safeguard the interest of holders of warehouse receipts issued under this chapter, Chapter 19 of this title, and Chapter 7 of Title 36, the department shall require a surety bond or equivalent security from the applicant for a warehouse license for the faithful performance of his duties. The bond or other security must be in an amount of twenty-five thousand dollars for each warehouse. The bond must provide that the warehouseman personally shall account for and pay over, according to law, all money and property received by him and, in cases of default, the surety shall pay all damages, costs, and expenses resulting from the default. In the event of a default, the holder of the warehouse receipt may proceed directly against the warehouseman or surety or both on the bond to recover the loss and a surety or other insurer who has been required to respond financially upon the action must be subrogated to all rights of the holder of the warehouse receipt.

The department shall assist the warehousemen in obtaining their individual bonds at the best available rate under a group plan, when possible.

Section 39-22-30. The department shall promulgate regulations to implement the provisions of this chapter.

Section 39-22-40. The provisions of this chapter referring to cotton also refer to all nonperishable farm products as defined by the Commissioner of Agriculture.

Section 39-22-50. Cotton designated as 'linters' may not be received for storage under the provisions of this chapter.

Section 39-22-60. The Department of Agriculture shall accept as authoritative the standards and classifications of cotton established by the federal government.

Section 39-22-70. A receipt for lint cotton must be issued under the seal and signature of the Commissioner of Agriculture or his deputy in the name of the State, stating the location of the warehouse, the name of the manager, the tag number on the bale and the weight, grade, and staple to enable delivery on surrender of the receipt of the identical cotton for which it was given. The grade and staple may be omitted at the request of the depositor. The receipt may be issued in bearer or order form.

Section 39-22-80. The warehouse receipt forms must be designed or otherwise approved by the commissioner. All orders for the printing of warehouse receipts and bale tags must be preapproved by the department. The receipts must be numbered and the warehouse receiving the forms shall account for each receipt. The receipts may have the lithographed or engraved signature of the commissioner but they must be signed with pen and ink, indelible pencil, or mechanical device approved by the commissioner, by the authorized manager of the licensed warehouse.

Section 39-22-90. (A) It is unlawful for:

(1) the manager or owner of a warehouse or an agent or employee to issue or aid in issuing a receipt for a commodity, knowing that the commodity has not been actually placed in the warehouse under the control of the manager or owner of the commodity;

(2) a person to induce a warehouseman to issue a receipt for a commodity, knowing that the commodity has not been actually placed in the warehouse under the control of the manager or owner of the commodity;

(3) a person to knowingly issue a warehouse receipt in a name other than that of the lawful owner of the commodity, or his designee, for which the receipt is given;

(4) a person to knowingly deliver an agricultural commodity to a warehouse or dealer on which a lien is outstanding without giving written notice to the warehouseman or dealer of the lien;

(5) a person to induce a warehouseman to deliver a commodity without first obtaining warehouse receipts issued for it;

(6) a manager, owner, or employee of a warehouse to knowingly deliver a commodity without first obtaining warehouse receipts issued for it;

(7) a warehouse auditor who, upon the auditing of a warehouse in the state warehouse system, finds items (2) and (5) of this section to have been violated to fail to report the violation on his regular report of the inspection, regardless of whether or not the violation is corrected before the report is filed;

(8) a person to issue or aid in issuing a duplicate or additional receipt for cotton or other commodity, knowing that the former receipt or any part of it is outstanding unless a receipt has become lost or destroyed and the goods are delivered or a duplicate receipt is issued in accordance with the provisions of law covering those cases.

(B) A person violating the provisions of item (1), (2), (3), or (4) of this section is guilty of a misdemeanor and, upon conviction, must be fined not more than five thousand dollars or imprisoned for not less than one year nor more than five years, or both.

A person violating the provisions of item (5) or (6) of this section is guilty of a misdemeanor and, upon conviction, must be fined not more than five thousand dollars or imprisoned for not more than one year, or both.

A person violating the provisions of item (7) of this section is guilty of a misdemeanor and, upon conviction, must be fined not more than one thousand dollars or imprisoned for not more than one year, or both, for each violation.

A person violating the provisions of item (8) of this section is guilty of forgery and, upon conviction, must receive the penalty provided for a conviction of that crime.

Section 39-22-100. The weights, classes, and grades of cotton, if shown on a warehouse receipt issued for the cotton, or other nonperishable farm products on storage are guaranteed by the State under this chapter only in favor of those who loan money on or buy cotton stored in warehouses. The State is not responsible for fluctuations in weight resulting from ordinary climatic conditions.

Section 39-22-110. Each bale of cotton accepted for storage in a warehouse operated under the state warehouse system must be identified by a numbered tag affixed to the bale. The tag must be designed so that the brand 'South Carolina' may be unmistakably visible. The palmetto tree, with a bale of cotton lying at the roots, and the shield of the State must be printed on the tag. The county of origin may appear on the tag.

Section 39-22-120. Each licensed warehouseman shall insure and keep insured against loss or damage by fire, theft, burglary, and other hazards which are commonly insured against, under 'extended coverage' provisions, for its full value, all cotton and other products on storage unless requested by the depositor in writing not to insure the cotton or other products and in that instance when the cotton or other products are not insured a statement to that effect must be plainly and conspicuously inserted on the face of the receipt. In case of loss, the warehouseman shall collect the insurance due and pay it ratably to those lawfully entitled to payment. The warehouseman may accept contracts for the storage of cotton submitted by the Commodity Credit Corporation and other United States governmental agencies without being required to carry insurance on the cotton. As a condition of license, each warehouseman shall maintain on file with the department a current certificate of insurance setting forth the policy number, the agent and underwriter, the provisions and limits of coverage, and the date the policy expires.

Section 39-22-130. Each warehouse must be inspected, the inventory taken, and the records checked at least once in every three months.

Section 39-22-140. All sums collected under this chapter must be transferred annually to a special account in the State Treasury according to the provisions of Section 39-22-150.

Section 39-22-150. All net revenues derived from operation of the state warehouse system must be transferred annually to a special account in the State Treasury until the sum of three million dollars accrues. When the fund reaches three million dollars, these transfers shall cease; however, all interest and investment revenue shall accrue solely to the fund and be returned annually to the fund. In order to support the increase of this fund, the funds must be invested at interest by the State Treasurer who shall credit the interest earned on the funds to the increase of the fund up to and above three million dollars. In addition to the interest, the commissioner shall assess an amount ratably against each warehouseman in this State issuing warehouse receipts a special additional fee not to exceed ten cents a bale of cotton or one cent a bushel of soybeans and one-half cent a bushel of any other stored feed grains or oil seeds for which warehouse receipts have been issued. The additional assessment may be charged not more than once for each receipt issued on a bale of cotton or bushel of grain. When the fund has reached the total sum of one million, five hundred thousand dollars, the special additional assessment must be discontinued. If the fund is reduced to below one million dollars, the assessment must be resumed. The funds must be used to guarantee state warehouse receipts in excess of an amount recovered from the bonds required by this chapter. If there is an insufficient amount of money in the fund to cover all claims against the fund, payments must be made on a pro rata basis up to one hundred percent of the total loss of each claimant. If payment is not received in the amount of one hundred percent then additional amounts must be paid as funds become available until payment of one hundred percent of the total is attained. The state's guarantee of warehouse receipts is based on monies available through the required bonds and the fund. Upon approval of a claim to the fund and before payment from the fund, the claimant shall subrogate his interest, if any, to the department in a cause of action against all parties relating to the claim. In no event may the funds be available for the reimbursement of an insurer or surety on the bonds required by this chapter, Chapter 19 of this title, or Chapter 7 of Title 36, who has paid a loss under this chapter. All income, interest or otherwise, derived from this guaranty fund must be reinvested in the fund. Fifty thousand dollars of the income must be paid into the general fund of the State. Any of the funds not appropriated for the employment of additional auditors for the warehousemen and Dealers and Handlers Division of the Department of Agriculture must be returned to the fund.

Section 39-22-160. The Commissioner of Agriculture shall make an annual report to the General Assembly setting forth (1) the number and location of each warehouse where cotton has been received for storage, (2) the cotton on storage and that delivered on presentation of receipts, and (3) monies received and disbursed.

Section 39-22-170. The extent of the state's liability is limited to the amount of monies available through the guaranty fund and, therefore, no debt or other liability may be created against the State by reason of the licensing of a warehouse under this chapter except as provided by this chapter.

Section 39-22-180. It is lawful for a warehouseman licensed by the commissioner to operate a state warehouse to execute and enter into an agreement or contract required by the Commodity Credit Corporation or other agency of the United States government when the agreement or contract is necessary to secure the support price for certain stored commodities. Whenever the contract or agreement conflicts with the provisions of the state warehouse system or the Uniform Commercial Code - Documents of Title the conflicting provisions are suspended, but only to the extent that the suspension of the conflicting provisions is a minimum requirement of the agency of the United States government.

Section 39-22-190. All warehousemen licensed to store grain shall maintain current and complete records at all times with respect to all feed grains and oil seeds on forms approved by the Department of Agriculture pursuant to regulations promulgated by the department including grain owned by him as well as other feed grains or oil seeds not subject to the terms of the state warehouse system, stored in or handled through the warehouse. The records must include, but not be limited to, a daily record showing:

(1) the total quantity of each kind and class of feed grains or oil seeds received and delivered and the quantity of each kind and class of feed grains or oil seeds remaining in the warehouse at the close of each business day;

(2) the warehouseman's total storage obligations for each kind and class of feed grains or oil seeds at the close of each business day.

Incoming feed grains or oil seeds must be documented as to ownership and as to whether the feed grains or oil seeds are owned by the warehouseman or someone else. Feed grains or oil seeds received may be purchased by the warehouse before or upon arrival at the elevator or warehouse and after they have been in storage for a time. All operations must be documented properly to reflect ownership, quantity of feed grains, or oil seeds received, quantity delivered, and quantity in storage in the warehouse.

Section 39-22-200. A state warehouse receipt must be issued by the warehouseman to a person storing commodities who requests it. If no receipt is issued to the storing party directly, one must be written to show ownership and held at the warehouse office properly locked and secured. No receipt may be issued in the name of the storing warehouse, or its owners, on commodities being purchased by the warehouse until the commodity has been paid for in full, even if a contract has been executed establishing that the title to the commodity has passed to the warehouse or its owners unless the buyer and seller execute an affidavit within the contract stating that the seller conveys title and ownership of the commodity and forfeits all of his rights under the Dealer and Handler Guaranty Fund. The affidavit must be in bold print on the face of the contract and must further state that the seller has read the contract in full, understands it, and waives all rights to contest his knowledge of any part of the contract. Those provisions do not reduce the responsibility of the warehouseman to keep proper records as required by Section 39-22-190."

Repeal

SECTION 2. Chapter 21, Title 39 of the 1976 Code is repealed.

Exemption

SECTION 3. The 1976 Code is amended by adding:

"Section 39-25-35. The provisions of Section 39-25-30 do not apply to water-powered grist mills or their products."

Time effective

SECTION 4. This act takes effect upon approval by the Governor.

Approved the 24th day of April, 1990.