HF 2718

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 03/27/2023 03:48pm

A bill for an act
relating to agriculture; establishing a grain indemnity account; appropriating money;
amending Minnesota Statutes 2022, sections 223.16, by adding a subdivision;
223.17, subdivisions 7, 7a; 223.175; 223.19; 232.22, subdivision 5; proposing
coding for new law in Minnesota Statutes, chapter 223; repealing Minnesota
Statutes 2022, sections 223.17, subdivisions 4, 8; 232.22, subdivisions 4, 6, 6a, 7.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 223.16, is amended by adding a subdivision
to read:

new text begin Subd. 3c. new text end

new text begin Failure. new text end

new text begin "Failure" means a determination by the commissioner that a grain
buyer or grain warehouse has failed to pay for delivered grain, breached a contract, breached
more than one contract, or failed to redeliver stored grain to a producer.
new text end

Sec. 2.

Minnesota Statutes 2022, section 223.17, subdivision 7, is amended to read:

Subd. 7.

deleted text begin Action on a bond deleted text end new text begin Breach of contract new text end .

A producer claiming to be damaged
by a breach of a contract for the purchase of grain by a deleted text begin licensed deleted text end grain buyer may file a
written claim with the commissioner. The claim must state the facts constituting the claim.
deleted text begin The claim must be filed with the commissioner within 180 days of the breach of the contract. deleted text end
If a claim is valid, the commissioner may immediately suspend the license, in which case
the licensee shall surrender the license to the commissioner. Within 15 days the licensee
may request an administrative hearing subject to chapter 14 to determine whether the license
should be revoked. If no request is made within 15 days, the commissioner shall revoke the
license.

Sec. 3.

Minnesota Statutes 2022, section 223.17, subdivision 7a, is amended to read:

Subd. 7a.

Bond requirements deleted text begin ; claims deleted text end .

For entities licensed under this chapter and
chapter 232, the bond requirements and deleted text begin claims deleted text end new text begin actions new text end against the bond are governed under
section deleted text begin 232.22, subdivision 6a deleted text end new text begin 223.24, subdivision 13 new text end .

Sec. 4.

Minnesota Statutes 2022, section 223.175, is amended to read:

223.175 WRITTEN VOLUNTARY EXTENSION OF CREDIT CONTRACTS;
FORM.

A written confirmation required under section 223.177, subdivision 2, and a written
voluntary extension of credit contract must include those items prescribed by the
commissioner by rule. A contract shall include a statement of the legal and financial
responsibilities of grain buyers and sellers established in this chapter. A contract shall also
include the following statement in not less than ten point, all capital type, framed in a box
with space provided for the seller's signature: "THIS CONTRACT CONSTITUTES A
VOLUNTARY EXTENSION OF CREDIT. THIS CONTRACT deleted text begin IS NOT COVERED BY
ANY GRAIN BUYER'S BOND deleted text end new text begin MAY NOT BE COVERED COMPLETELY BY THE
GRAIN INDEMNITY ACCOUNT new text end ." If a written contract is provided at the time the grain
is delivered to the grain buyer, the seller shall sign the contract in the space provided beneath
the statement. A transaction that does not meet the provisions of a voluntary extension of
credit, including the issuance and signing of a voluntary extension of credit contract, is a
cash sale.

Sec. 5.

Minnesota Statutes 2022, section 223.19, is amended to read:

223.19 RULES.

The commissioner may make rules pursuant to chapter 14 to carry out the provisions of
sections 223.15 to deleted text begin 223.23 deleted text end new text begin 223.24 new text end .

Sec. 6.

new text begin [223.24] GRAIN INDEMNITY ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The grain indemnity account is established under the
direction and control of the commissioner of agriculture. The grain indemnity account shall
consist of grain indemnity premiums, money from any other source, and interest.
new text end

new text begin Subd. 2. new text end

new text begin Account; appropriation. new text end

new text begin (a) A grain indemnity account is established in the
agricultural fund. Money in the grain indemnity account, including interest, is appropriated
to the commissioner to pay valid claims and to administer this section.
new text end

new text begin (b) The commissioner shall direct payments from the grain indemnity account only for
the following purposes:
new text end

new text begin (1) the payment of valid claims;
new text end

new text begin (2) the payment of grain indemnity premium refunds;
new text end

new text begin (3) the payment of administrative expenses under paragraph (c);
new text end

new text begin (4) the payment of legal fees and legal expenses under subdivision 7; or
new text end

new text begin (5) the payment of a trustee appointed under subdivision 6.
new text end

new text begin (c) The commissioner shall allocate money from the grain indemnity account to a separate
administrative expenses account to pay or reimburse the agency for grain indemnity account
expenses. Administrative expenses under this paragraph include the actual cost of processing
payments and refunds, enforcement, record keeping, ordinary management and investment
fees connected with the operation of the grain indemnity account, and legal expenses.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility. new text end

new text begin A producer is eligible to receive a grain indemnity payment from
the commissioner if the producer sold grain to a grain buyer as defined in this chapter or
stored grain with a public grain warehouse operator under chapter 232 and the producer is
damaged by the grain buyer's or public grain warehouse operator's failure to pay for or
redeliver grain.
new text end

new text begin Subd. 4. new text end

new text begin Application. new text end

new text begin (a) A producer asserting eligibility under subdivision 3 must file
a completed claim with the commissioner. The producer must state the facts constituting
the claim and all other information required by the commissioner.
new text end

new text begin (b) Upon receiving a claim, the commissioner must promptly determine the validity of
the claim and notify the claimant of the commissioner's determination.
new text end

new text begin (c) An aggrieved party may appeal the commissioner's determination by requesting,
within 15 days, that the commissioner initiate a contested case proceeding under chapter
14.
new text end

new text begin Subd. 5. new text end

new text begin Payment limitation. new text end

new text begin (a) For each failure as defined by section 223.16,
subdivision 3c, the commissioner must pay the eligible producer:
new text end

new text begin (1) the amount equal to the value of the grain sold on cash sale, grain assigned to
warehouse receipt, or grain assigned to open storage less than 180 days from the deposit;
new text end

new text begin (2) the amount equal to the value of grain sold up to $300,000, or the lesser of $750,000
or 75 percent of the amount owed to the seller for a contract in excess of $300,000 for a
deferred or delayed payment contract for which a price has been established when the
contract originated within 120 days of the breach of contract;
new text end

new text begin (3) the lesser of $750,000 or 75 percent of the amount owed to the seller for a voluntary
extension of credit contract for which no price has been established when the contract
originated within 180 days of the breach of contract;
new text end

new text begin (4) the lesser of $500,000 or 50 percent for an open storage assignment or a voluntary
extension of credit contract when the open storage assignment or contract originated between
181 days and 18 months from the failure; or
new text end

new text begin (5) the lesser of $250,000 or 25 percent for an open storage assignment or a voluntary
extension of credit contract when the open storage assignment or contract originated between
19 months and 36 months from the failure.
new text end

new text begin (b) Claims filed more than 36 months from the failure are not eligible for payment.
new text end

new text begin (c) For the purposes of this subdivision, multiple breaches of contract with a single entity
constitute one failure.
new text end

new text begin (d) If a grain buyer holds both a Minnesota grain buyer license, as defined in chapter
223, and a license with the United States Department of Agriculture (USDA) under the
United States Warehouse Act, a seller may only file a claim with the grain indemnity account
if the seller sold grain as a cash sale or under a voluntary extension of credit contract. The
commissioner must deny any claims for stored grain from a seller that holds both a Minnesota
grain buyer license and a license with the USDA under the United States Warehouse Act.
new text end

new text begin (e) If valid claims exceed the amount of money available in the grain indemnity account,
the commissioner must pay claims to producers in the order that the claims were received.
When additional money becomes available, the commissioner must resume issuing grain
indemnity payments to each eligible producer until each producer receives the maximum
amount payable under paragraph (a).
new text end

new text begin (f) If the grain indemnity account balance is insufficient to pay refunds under subdivision
11 and valid claims exist, once money is deposited into the grain indemnity account, the
commissioner must issue pending refunds for grain indemnity premium payments before
issuing payments to claimants.
new text end

new text begin Subd. 6. new text end

new text begin Court order. new text end

new text begin (a) The commissioner may apply to a district court for an order
appointing a trustee or receiver to manage and supervise the operations of a grain buyer or
public grain warehouse operator in default. The commissioner may participate in any
resulting court proceeding as an interested party.
new text end

new text begin (b) The commissioner may recover the cost of the appointed trustee using money
appropriated under subdivision 2.
new text end

new text begin Subd. 7. new text end

new text begin Debt obligation; subrogated claim. new text end

new text begin (a) Money paid by the commissioner to
satisfy a valid claim constitutes a debt obligation of the grain buyer or public grain warehouse
operator in default. The commissioner may take action against the grain buyer or public
grain warehouse operator to recover the amount of any claim payment plus reasonable costs,
attorney fees, and interest computed at the rate provided in section 270C.40. The
commissioner must deposit any amount recovered under this subdivision in the grain
indemnity account.
new text end

new text begin (b) As a condition of payment from the commissioner, a producer must subrogate the
producer's interest in a voluntary extension of credit contract to the commissioner in an
amount equal to any claim payment or payments that the producer received under this
section.
new text end

new text begin (c) The commissioner may recover any debt to the grain indemnity account from a
member of the board or management who acted negligently or fraudulently.
new text end

new text begin Subd. 8. new text end

new text begin Grain indemnity premiums. new text end

new text begin (a) Except as provided in subdivision 10,
producers of grain must be charged a grain indemnity premium as determined and published
by the commissioner not to exceed 0.2 percent of the price on all marketed grain that is sold
to a grain buyer as defined in chapter 223.
new text end

new text begin (b) The grain indemnity premiums required under this section are in addition to any
other fees or assessments required by law.
new text end

new text begin Subd. 9. new text end

new text begin Collection and submission of grain indemnity premiums. new text end

new text begin (a) Each producer
must pay to the commissioner a grain indemnity premium of not more than 0.2 percent of
the net proceeds from all grain sold by the producer to a grain buyer purchasing grain in
Minnesota. When grain is sold to a grain buyer, the grain buyer must deduct the grain
indemnity premium from the proceeds of the sale and pay the grain indemnity premium to
the commissioner on behalf of the producer.
new text end

new text begin (b) When purchasing grain from a producer, a grain buyer must deduct the grain
indemnity premium described in paragraph (a) from the proceeds of the sale and notify the
producer of the amount of the deduction in writing. The grain buyer must forward the grain
indemnity premium to the commissioner for a deposit into the grain indemnity account on
behalf of the producer as described in this subdivision.
new text end

new text begin (c) A grain buyer must clearly indicate the grain indemnity premiums collected under
paragraph (b) in the grain buyer's books and records. A grain buyer must retain books and
records containing the grain indemnity premiums for at least three years. A grain buyer
must make the grain buyer's books and records available for inspection by the commissioner
during regular business hours. The department must take steps reasonably necessary to
verify the accuracy of the grain indemnity premiums as recorded in the grain buyer's books
and records. Any record or portion thereof seized or copied by the commissioner is private
or nonpublic data as provided in section 13.02, except that the commissioner may disclose
this data to aid in the law enforcement process.
new text end

new text begin (d) A grain buyer must submit grain indemnity premiums collected under paragraph (a)
to the commissioner for the purpose of financing or contributing to the financing of the
grain indemnity account by:
new text end

new text begin (1) January 31 for grain indemnity premiums collected during the months of July, August,
September, October, November, and December; and
new text end

new text begin (2) July 31 for grain indemnity premiums collected during the months of January,
February, March, April, May, and June.
new text end

new text begin Subd. 10. new text end

new text begin Amount in grain indemnity account; basis for suspension and
reinstatement of grain indemnity premium collection. new text end

new text begin (a) The grain indemnity premiums
required under subdivision 8 must be collected until the grain indemnity account contains
more than $15,000,000, as of June 30 of any given year.
new text end

new text begin (b) Except as provided in paragraph (c), after the grain indemnity account reaches
$15,000,000, the commissioner must not require the collection of additional grain indemnity
premiums until the amount in the grain indemnity account drops below $9,000,000. In a
year when the commissioner determines that the grain indemnity account is at or below
$9,000,000, the commissioner may reinstate the collection described in this section.
new text end

new text begin (c) The commissioner shall announce the intention to collect the premiums described
in this section by May 1 with collection to begin July 1 until the grain indemnity account
contains at least $15,000,000. The commissioner must notify the public of the commissioner's
intent to reinstate collection of additional grain indemnity premiums through publication
in the State Register and by notifying each licensee of the licensee's obligation to collect
premiums.
new text end

new text begin Subd. 11. new text end

new text begin Grain indemnity refund; opt out. new text end

new text begin (a) Subject to subdivision 9, a producer
that has paid a grain indemnity premium may receive a refund of that premium from the
grain indemnity account by submitting a written demand for a refund to the commissioner,
delivered personally or by first-class mail within 12 months after the producer paid the grain
indemnity premium.
new text end

new text begin (b) A producer must submit a demand for a refund of a grain indemnity premium under
paragraph (a) on a demand for refund form developed by the commissioner. The
commissioner must make the form available to a licensee, producer, or member of the public
upon request.
new text end

new text begin (c) If a producer is entitled to a refund of a grain indemnity premium under this section,
the commissioner must pay the refund within 90 days of receiving the demand for a refund.
If the grain indemnity account balance is insufficient to pay refunds under this subdivision
and valid claims exist, once money is deposited into the grain indemnity account, the
commissioner must issue pending refunds for grain indemnity premium payments before
issuing payments to claimants.
new text end

new text begin (d) If the commissioner announces grain indemnity premiums as required under
subdivision 10 by June 30, the commissioner must send a notice to each producer who
requested a refund of a grain indemnity premium during the previous three fiscal years. The
notice must inform the producer of the deadline for and method of submitting a demand for
a refund to the commissioner under paragraphs (a) and (b) and the method for reentering
the grain indemnity program under paragraph (e).
new text end

new text begin (e) A producer that receives a refund of a grain indemnity premium under paragraph (a)
is not entitled to participate in the grain indemnity program or to receive any payment under
this section unless the producer reenters the grain indemnity program by meeting all of the
following conditions:
new text end

new text begin (1) the producer must submit a request for reentry into the grain indemnity program to
the commissioner. The producer must submit the request on the form required by the
commissioner and must deliver the request to the commissioner;
new text end

new text begin (2) the producer's request is approved by the commissioner; and
new text end

new text begin (3) the producer must pay into the grain indemnity account all grain indemnity premiums
that were refunded to the producer and interest on the refunds as determined by the
commissioner.
new text end

new text begin (f) A producer that reenters the grain indemnity program under paragraph (e) is eligible
to be reimbursed for claims under the grain indemnity program for any breach of contract
that occurs at least 120 days after reentry.
new text end

new text begin (g) A producer is not eligible for a refund of a grain indemnity premium under this
section if the producer has received payment from the grain indemnity account for a valid
claim within the preceding 36 months.
new text end

new text begin Subd. 12. new text end

new text begin Penalties; enforcement action; costs and expenses. new text end

new text begin (a) In addition to any
other penalty or remedy provided by law, a person who knowingly or intentionally commits
any of the following is subject to civil penalties under section 18J.10:
new text end

new text begin (1) refusing or failing to collect any grain indemnity premiums as required under this
section;
new text end

new text begin (2) refusing or failing to pay to the commissioner any grain indemnity premiums collected
under this section;
new text end

new text begin (3) making a false statement, representation, or certification, or knowingly failing to
make a required statement, representation, or certification in a record, report, or other
document required under this section or filed with the commissioner; or
new text end

new text begin (4) resisting, preventing, impeding, or interfering with the commissioner in the
performance of the commissioner's duties under this section.
new text end

new text begin (b) In addition to the civil penalty described in paragraph (a), the commissioner in an
enforcement action for a violation described in paragraph (a), clause (1) or (2), must order
the grain buyer to pay into the grain indemnity account any grain indemnity premiums
collected by the grain buyer that the grain buyer owes to the grain indemnity account and
may order the grain buyer to pay interest on the amount that the grain buyer owes to the
grain indemnity account.
new text end

new text begin Subd. 13. new text end

new text begin Grain bonds; new license holders. new text end

new text begin (a) Except as provided in paragraph (b),
before the commissioner issues a grain buyer or public grain warehouse operator license,
a person who has not been licensed to buy grain or operate a public grain warehouse in the
previous licensing period must file with the commissioner a grain bond in a penal sum of
$100,000. A grain bond must remain in effect for the first three years of the license.
new text end

new text begin (b) A grain buyer who purchases grain immediately upon delivery solely with cash; a
certified check; a cashier's check; or a postal, bank, or express money order is exempt from
this subdivision if the grain buyer's gross annual purchases are $1,000,000 or less.
new text end

new text begin (c) The commissioner may require a supplemental bond in an amount prescribed by the
commissioner based on the financial statements required in section 223.17, subdivision 6.
new text end

new text begin (d) A grain bond must be on a form provided by the commissioner.
new text end

new text begin (e) A grain bond required under paragraphs (a) and (c) must provide for the payment of
any loss caused by the grain buyer's failure to pay upon the owner's demand, including loss
caused by the grain buyer's failure to pay within the time required. The grain bond must be
conditioned upon the grain buyer being duly licensed. A grain bond required under paragraphs
(a) and (c) that is obtained by a public grain warehouse operator must be conditioned that
the public grain warehouse operator issuing a grain warehouse receipt is liable to the depositor
for the delivery of the kind, grade, and net quantity of grain called for by the receipt. A
grain bond must be conditioned upon the operator being duly licensed. For those entities
licensed under this chapter, the entire grain bond must be available to any claims against
the grain bond filed under this chapter.
new text end

new text begin (f) A grain bond must not be cumulative from one licensing period to the next. The
maximum liability of the grain bond must be the grain bond's face value for the licensing
period.
new text end

new text begin (g) A grain bond must be continuous until canceled. To cancel a grain bond, a surety
must provide 90 days' written notice of the grain bond's termination date to the licensee and
the commissioner.
new text end

new text begin (h) Upon the commissioner's determination that a claim is valid, the surety for any claims
against the grain bond must make payments to the grain indemnity account.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2023.
new text end

Sec. 7.

Minnesota Statutes 2022, section 232.22, subdivision 5, is amended to read:

Subd. 5.

Statement of grain in storage; reports.

deleted text begin (a) All public grain warehouse operators
must by February 15 of each year file with the commissioner on a form approved by the
commissioner a report showing the annual average liability of all grain outstanding on grain
warehouse receipts, open storage, and grain stored for feed processing that occurred during
the preceding calendar year. This report shall be used for the purpose of establishing the
penal sum of the bond.
deleted text end

deleted text begin (b) Warehouse operators that are at a maximum bond and want to continue at maximum
bond do not need to file this report.
deleted text end

deleted text begin (c) It is a violation of this chapter for any public grain warehouse operator to fail to file
the report required in paragraph (a).
deleted text end

deleted text begin (d) deleted text end new text begin (a) new text end Every public grain warehouse operator shall keep in a place of safety complete
and accurate records and accounts relating to any grain warehouse operated. The records
shall reflect each commodity received and shipped daily, the balance remaining in the grain
warehouse at the close of each business day, a listing of all unissued grain warehouse receipts
in the operator's possession, a record of all grain warehouse receipts issued which remain
outstanding and a record of all grain warehouse receipts which have been returned for
cancellation. Copies of grain warehouse receipts or other documents evidencing ownership
of grain by a depositor, or other liability of the grain warehouse operator, shall be retained
as long as the liability exists but must be kept for a minimum of three years.

deleted text begin (e) deleted text end new text begin (b) new text end Every public grain warehouse operator must maintain in the grain warehouse at
all times grain of proper grade and sufficient quantity to meet delivery obligations on all
outstanding grain warehouse receipts.

Sec. 8. new text begin TRANSFER.
new text end

new text begin $5,000,000 in fiscal year 2024 is transferred from the general fund to the grain indemnity
account established in section 6.
new text end

Sec. 9. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2022, sections 223.17, subdivisions 4 and 8; and 232.22, subdivisions
4, 6, 6a, and 7, new text end new text begin are repealed.
new text end

APPENDIX

Repealed Minnesota Statutes: H2718-1

223.17 LICENSES; BONDING; CLAIMS; DISBURSEMENTS.

Subd. 4.

Bond.

(a) Except as provided in paragraphs (c) to (e), before a grain buyer's license is issued, the applicant for the license must file with the commissioner a bond in a penal sum prescribed by the commissioner but not less than the following amounts:

(1) $10,000 for grain buyers whose gross annual purchases are $100,000 or less;

(2) $20,000 for grain buyers whose gross annual purchases are more than $100,000 but not more than $750,000;

(3) $30,000 for grain buyers whose gross annual purchases are more than $750,000 but not more than $1,500,000;

(4) $40,000 for grain buyers whose gross annual purchases are more than $1,500,000 but not more than $3,000,000;

(5) $50,000 for grain buyers whose gross annual purchases are more than $3,000,000 but not more than $6,000,000;

(6) $70,000 for grain buyers whose gross annual purchases are more than $6,000,000 but not more than $12,000,000;

(7) $125,000 for grain buyers whose gross annual purchases are more than $12,000,000 but not more than $24,000,000; and

(8) $150,000 for grain buyers whose gross annual purchases exceed $24,000,000.

(b) The amount of the bond shall be based on the most recent gross annual grain purchase report of the grain buyer.

(c) A first-time applicant for a grain buyer's license shall file a $50,000 bond with the commissioner. This bond shall remain in effect for the first year of the license. Thereafter, the licensee shall comply with the applicable bonding requirements contained in paragraph (a), clauses (1) to (8).

(d) In lieu of the bond required by this subdivision the applicant may deposit with the commissioner of management and budget an irrevocable bank letter of credit as defined in section 336.5-102, in the same amount as would be required for a bond.

(e) A grain buyer who purchases grain immediately upon delivery solely with cash; a certified check; a cashier's check; or a postal, bank, or express money order is exempt from this subdivision if the grain buyer's gross annual purchases are $1,000,000 or less.

(f) Bonds must be continuous until canceled. To cancel a bond, a surety must provide 90 days' written notice of the bond's termination date to the licensee and the commissioner.

Subd. 8.

Bond disbursement.

(a) The bond required under subdivision 4 shall provide for payment of loss caused by the grain buyer's failure to pay, upon the owner's demand, the purchase price of grain sold to the grain buyer in the manner provided by subdivision 5, including loss caused by failure to pay within the time required. The bond shall be conditioned upon the grain buyer being duly licensed as provided herein.

(b) The commissioner shall promptly determine the validity of all claims filed and notify the claimants of the determination. An aggrieved party may appeal the commissioner's determination by requesting, within 15 days, that the commissioner initiate a contested case proceeding. In the absence of such a request, or following the issuance of a final order in a contested case, the surety company shall issue payment promptly to those claimants entitled to payment. The commissioner may apply to the district court for an order appointing a trustee or receiver to manage and supervise the operations of the grain buyer in default. The commissioner may participate in any resulting court proceeding as an interested party.

(c) If a grain buyer has become liable to more than one producer by reason of breaches of the conditions of the bond and the amount of the bond is insufficient to pay the entire liability to all producers entitled to the protection of the bond, the proceeds of the bond shall be apportioned among the bona fide claimants.

(d) The bond shall not be cumulative from one licensing period to the next. The maximum liability of the bond shall be its face value for the licensing period.

(e) The bond disbursement shall occur 200 days from the date the commissioner publishes a public notice of a claim. At the end of this time period, the commissioner shall initiate bond payments on all valid claims received by the commissioner.

232.22 LICENSES, BONDING CLAIMS, DISBURSEMENTS.

Subd. 4.

Bonding.

(a) Before a license is issued, except as provided under paragraph (c), the applicant for a public grain warehouse operator's license shall file with the commissioner a bond in a penal sum prescribed by the commissioner based on the annual average storage liability as stated on the statement of grain in storage report or on the gross annual grain purchase report, whichever is greater, and applying the following amounts:

(1) $10,000 for storages with annual average storage liability of more than $0 but not more than $25,000;

(2) $20,000 for storages with annual average storage liability of more than $25,001 but not more than $50,000;

(3) $30,000 for storages with annual average storage liability of more than $50,001 but not more than $75,000;

(4) $50,000 for storages with annual average storage liability of more than $75,001 but not more than $100,000;

(5) $75,000 for storages with annual average storage liability of more than $100,001 but not more than $200,000;

(6) $125,000 for storages with annual average storage liability of more than $200,001 but not more than $300,000;

(7) $175,000 for storages with annual average storage liability of more than $300,001 but not more than $400,000;

(8) $225,000 for storages with annual average storage liability of more than $400,001 but not more than $500,000;

(9) $275,000 for storages with annual average storage liability of more than $500,001 but not more than $600,000;

(10) $325,000 for storages with annual average storage liability of more than $600,001 but not more than $700,000;

(11) $375,000 for storages with annual average storage liability of more than $700,001 but not more than $800,000;

(12) $425,000 for storages with annual average storage liability of more than $800,001 but not more than $900,000;

(13) $475,000 for storages with annual average storage liability of more than $900,001 but not more than $1,000,000; and

(14) $500,000 for storages with annual average storage liability of more than $1,000,000.

(b) Bonds must be continuous until canceled. To cancel a bond, a surety must provide 90 days' written notice of the bond's termination date to the licensee and the commissioner.

(c) In lieu of the bond required by this subdivision, the applicant may deposit with the commissioner of management and budget an irrevocable bank letter of credit as defined in section 336.5-102, in the same amount as would be required for a bond.

Subd. 6.

Bond claims.

A person claiming to be damaged by a breach of the conditions of a bond of a licensed public grain warehouse operator may file a written claim with the commissioner stating the facts constituting the claim. The claim must be filed with the commissioner within 180 days of the breach of the conditions of the bond. If the commissioner has reason to believe that a claim is valid, the commissioner may immediately suspend the license of the public grain warehouse operator and the licensee must surrender the license to the commissioner. Within 15 days the licensee may request an administrative hearing subject to chapter 14 to determine whether the license should be revoked. If no request is made within 15 days the commissioner shall revoke the license.

Subd. 6a.

Bond determinations.

If a public grain warehouse operator is licensed under both this chapter and chapter 223, the warehouse shall have its bond determined by its gross annual grain purchase amount or its annual average grain storage value, whichever is greater. For those entities licensed under this chapter and chapter 223, the entire bond shall be available to any claims against the bond for claims filed under this chapter and chapter 223.

Subd. 7.

Bond disbursement.

(a) The bond of a public grain warehouse operator must be conditioned that the public grain warehouse operator issuing a grain warehouse receipt is liable to the depositor for the delivery of the kind, grade and net quantity of grain called for by the receipt.

(b) Upon notification of default, the commissioner shall determine the validity of all claims and notify all parties having filed claims. Any aggrieved party may appeal the commissioner's determination by requesting, within 15 days, that the commissioner initiate a contested case proceeding. In the absence of such a request, or following the issuance of a final order in a contested case, the surety company shall issue payment to those claimants entitled to payment. If the commissioner determines it is necessary, the commissioner may apply to the district court for an order appointing a trustee or receiver to manage and supervise the operations of the grain warehouse operator in default. The commissioner may participate in any resulting court proceeding as an interested party.

(c) For the purpose of determining the amount of bond disbursement against all valid claims under a condition one bond, all grain owned or stored in the public grain warehouse shall be sold and the combined proceeds deposited in a special fund. Payment shall be made from the special fund satisfying the valid claims of grain warehouse receipt holders.

(d) If a public grain warehouse operator has become liable to more than one depositor or producer by reason of breaches of the conditions of the bond and the amount of the bond is insufficient to pay, beyond the proceeds of the special fund, the entire liability to all valid claimants, the proceeds of the bond and special fund shall be apportioned among the valid claimants on a pro rata basis.

(e) A bond is not cumulative from one licensing period to the next. The maximum liability of the bond shall be its face value for the licensing period.

(f) The bond disbursement shall occur 200 days from the date the commissioner publishes a public notice of a claim. At the end of this time period, the commissioner shall initiate bond payments on all valid claims received by the department.