Section 281.5  Purpose

 

This Part provides regulations for the implementation and operation of the Grain Code.  The Code and this Part shall be liberally construed and liberally administered in favor of claimants as defined in Section 1-10 of the Code.  It is the explicit finding of the legislature that the grain industry in Illinois comprises a significant and vital part of the State's economy and that the purpose of the Code is to provide for a single system of governmental regulation of the Illinois grain industry. [240 ILCS 40/1-5]

 

(Source:  Added at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.7  Definitions

 

"Central Filing System" or "CFS" means an electronic system operated and maintained by a provider where information relating to warehouse receipts, electronic price later contracts and other electronic documents is recorded and maintained in a confidential and secure fashion independent of any outside influence or bias in action or appearance, and that is authorized by the Director.

 

"Code" means the Grain Code [240 ILCS 40].

 

"Department" means the Illinois Department of Agriculture.

 

"Director" means the Illinois Director of Agriculture, or the Director's designee.

 

"Electronic Document" means a document that is generated, sent, received, or stored by electrical, digital, magnetic, optical electromagnetic, or any other similar means, including, but not limited to, electronic data interchange, electronic mail, telegram, telex, or telecopy.

 

"Electronic Price Later Contract" or "EPLC" means a price later contract that is issued, transmitted, and stored in the form of an electronic document.

 

"Electronic record" means a record created, generated, sent, communicated, received, maintained, or stored by electronic means as set forth in the Uniform Electronic Transactions Act [815 ILCS 833/2].

 

"Electronic signature" means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record as defined in the Uniform Electronic Transactions Act [815 ILCS 833/2].

 

"Electronic Warehouse Receipt" or "EWR" means a warehouse receipt that is issued or transmitted in the form of an electronic document.

 

"FSA" means Farm Service Agency under the United States Department of Agriculture.

 

"Holder", with respect to an electronic warehouse receipt or any other electronic document, means a person in possession in fact or by operation of law.

 

"Licensee" means a grain dealer or warehouseman who is licensed by the Department and a federal warehouseman that is a participant in the Illinois Grain Insurance Fund.

 

"OSFM" means the Office of the State Fire Marshal of Illinois.

 

"Price Later Contract" means a contract, in written or electronic form, for the sale of grain whereby any part of the purchase price may be established by the seller after delivery of the grain to a grain dealer according to the pricing formula contained in the contract.  Title to the grain passes to the grain dealer at the time of delivery.  The precise form and the general terms and conditions of the contract shall be established by rule.

 

"Provider" means a disinterested third party that maintains one or more confidential and secure electronic systems independent of any outside interference or bias in action or appearance and that is authorized by the Director to be a provider.

 

"Provider Agreement" means the document and any amendment or addenda to an agreement executed by the provider and FSA or USDA pursuant to 7 CFR 735 that sets forth the provider's responsibilities concerning the provider's operation or maintenance of a CFS.

 

"Security procedure" means a procedure employed for the purpose of verifying that an electronic signature, record, or performance is that of a specific person or for detecting changes or errors in the information in an electronic record. The term includes a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment procedures as defined in the Uniform Electronic Transactions Act [815 ILCS 333/2].

 

"USDA" means United States Department of Agriculture.

 

"User" means an entity that uses a provider's CFS.

 

"Warehouse" means a building, structure, or enclosure in which grain is stored for the public for compensation, whether grain of different owners is commingled or whether identity of different lots of grain is preserved.

 

"Warehouse Receipt" means a receipt for the storage of grain issued by a warehouseman. [240 ILCS 40/1-10]

 

(Source:  Amended at 47 Ill. Reg. 5939, effective April 12, 2023)

 

Section 281.10  Right of Examination, Working Conditions and Examination Levels

 

a)         Right of Examination and Working Conditions

 

1)         The licensee shall permit the Department to examine all warehouse facilities, records or inventory without prior notice.  The licensee shall provide reasonable access to records at the location where records are maintained, or, if the records are located outside the State of Illinois, the Department may require that the records be brought to a specified location in Illinois for review by the Department.  The licensee shall provide reasonable assistance as requested to perform the examination.  The licensee shall reasonably remove risks or hazards that may be encountered during an examination.  The licensee shall provide the necessary assistance to any authorized representative of the Department for the safe measurement and sampling of the grain inventory.

 

2)         The licensee shall provide an acceptable work place at the location where the master books and records are maintained in order to allow any authorized representative of the Department to perform an examination.

 

b)         Examination Levels

Pursuant to Section 1-15(2) of the Code, the Department shall examine and inspect each licensee at least once each calendar year.  The Department shall perform one of three types of examination of licensees:  basic examination; intermediate examination; or advanced examination.  In ascertaining the level of risk present in a licensee's merchandising and trade practices, as part of the Department's determination as to which level of examination should be appropriate to a particular licensee, the Department may take into account such factors as the level of sophistication and experience of the licensee's merchandising personnel; the overall financial resources of the licensee, as an indication of ability to absorb and assume risk; the historical experience of the licensee with regard to the particular merchandising and trade practices being used; and the extent of the use of certain practices as a proportion of all merchandising and trading practices of the licensee.

 

1)         The basic examination shall be performed when the licensee's merchandising and trade practices involve minimal market risk, including cash back-to-back contracts, traditional hedges with the Chicago Board of Trade and price later contracts.

 

2)         The intermediate examination shall include all of those matters done as part of the basic examination and shall be performed when there is an increased amount of risk, including situations in which the licensee uses guaranteed minimum price contracts, purchases options or writes options.

 

3)         The advanced examination shall include all those matters done as part of the intermediate examination and shall be performed when the licensee's merchandising and grain practices involve the most risk, including when the licensee has discretionary trading authority from producers, uses premium offer type contracts, or has contracts with producers that cover multiple crop years.  The advanced examination shall include grain market risk evaluation, appropriate levels of risk for the licensee and adequacy of internal controls.

 

c)         Examinations may include, but are not limited to, the following:

 

1)         Verification of grain quality and quantity;

 

2)         Reconciliation of records of grain transactions, including, but not limited to, random selection of a sample of customer accounts and mailing of confirmations to verify accuracy of those records;

 

3)        Computation of current ratios as provided in the Code;

 

4)        Checking of posting procedures for accuracy;

 

5)         Grain market risk evaluation and appropriate levels of risk for the licensee;

 

6)         Examination of the most recent monthly financial statements of the licensee;

 

7)         Review and evaluation of the internal recordkeeping systems and controls of the licensee;

 

8)         Evaluation of the long/short market risk report for accuracy, complete accounting and full disclosure;

 

9)         Random spot checks and examination of specific contract information for each type of contracting method used by the licensee; and

 

10)        Market risk information reported by the licensee, at the commencement of the examination, on a form prescribed by the Department.  The prescribed form shall include, but is not limited to:

 

A)        Names of key personnel and/or business associates related to grain merchandising transactions;

 

B)        Marketing programs offered; and

 

C)        Types of contracts.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.20  Licensing:  Application, Fees and Financial Ratios

 

a)         Form and Content of Application

All applications for a license shall be filed on forms provided by the Department.  The application shall be signed by the applicant and shall include the following information, without limitation:

 

1)         Whether the applicant is a corporation, cooperative, partnership, individual or other business entity;

 

2)         The general manager's name and home address;

 

3)         The name and home address of the persons responsible for grain operations at each location;

 

4)         The names and home addresses of management, principal officers and members of the Board of Directors of the licensee;

 

5)         The current business address of the licensee;

 

6)         If the applicant has been engaged in the business as a grain dealer:

 

A)        for one year or more, the aggregate dollar amount paid to producers for grain during the applicant's last completed fiscal year; or

 

B)        for less than one year, or has not engaged in the business of buying grain from producers, the estimated aggregate dollar amount to be paid by the applicant to producers for grain purchased from producers during the applicant's first fiscal year;

 

7)         A summary of company-owned grain inventory, grain assets and payables, related party receivables and payables, net position and grain profits; and

 

8)         The criminal history of management and principal officers of the applicant or licensee.

 

                                   

b)         Grain Dealer Certificate Fee

The fee for a certificate of a grain dealer's license shall be $25.

 

c)         Criteria for Licenses and Certificates

 

1)         A grain dealer's license or a location certificate for a grain dealer's license is required for each individual address at which any of the following applies:

 

A)        Grain is received from producers and weighed across scales that are under the licensee's control.

 

B)        Contracts are negotiated and executed for the purchase of grain.

 

C)        Settlement or payment is made for grain purchased from Illinois producers.

 

D)        Records relating to any of these transactions are maintained.

 

2)         A grain warehouse license is required for each individual address at which either of the following applies:

 

A)        Grain is received from depositors for storage and weighed across a scale.

 

B)        Warehouse receipts are issued or grain storage records are maintained.

 

3)         A truck owned or leased and used for the purpose of receiving or transporting grain by a grain dealer is required to carry a certificate showing that a grain dealer's license is held by the owner or lessee. The fee for a certificate carried in a truck or tractor trailer unit used in connection with the licensee's grain dealer business shall be $25.  A truck  hired by the grain dealer to haul grain is exempt from the certificate requirement.

 

4)         Multiple Warehouse Locations

A common license may be issued for the operation of two or more warehouse facilities if the warehouseman operates each warehouse in conjunction with the other, all functioning under the same name, located in the same geographical area, operating out of a principal office, keeping the same set of records and having the same management.

 

d)         Filing for Extensions

 

1)        The application for extension and a preliminary financial statement must be received by the Department prior to the close of business on the date of expiration of the current license.

 

2)         The preliminary financial statement must:

 

A)        consist of a balance sheet and be compiled by an independent certified public accountant licensed under Illinois law or an entity permitted to engage in the practice of public accounting under Section 14(b)(3) of the Illinois Public Accounting Act [225 ILCS 450]; or

 

B)        in the case of a Class II Warehouseman or incidental grain dealer, be reviewed by an independent accountant that meets the requirements of Section 5-25(b) of the Code.

 

3)        If the licensee is also a warehouseman, the applicant must also submit a summary of the applicant's grain inventory and storage obligations.

 

4)        The Department must be satisfied that the applicant meets all renewal requirements (see Section 5-25 of the Code) no later than the date the extension expires.

 

5)        The applicant shall be required to provide an explanation as to why the extension is needed.

 

6)         An extension will be granted by the Department for a period of time not to exceed 30 days if the Department determines that the applicant appears to have complied with the financial requirements of Section 5-25(b) of the Code.

 

e)         Class II/Incidental Financial Statement Form

The Department shall request that an applicant for an incidental grain dealer or Class II warehouse license submit a financial statement on a form prescribed by the Department or a compiled financial statement consisting of an income statement and balance sheet completed by an independent accountant.

 

f)         Reduction of Filing Period for License Renewal

When the Department determines that an applicant has failed to meet the financial requirements of Section 5-25(b) of the Code, the Department shall reduce the filing period for an application for renewal of a license to no less than 60 days after the licensee's fiscal year end. The Department must give written notice of the reduced filing period to the licensee at least 60 days before the earlier deadline imposed by the Department to file the application for renewal of a license.

 

g)         Liquid assets shall include accrued storage, drying and price later service charges.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.30  Required Insurance

 

a)         Before a license shall be issued to the applicant or the licensed storage capacity is increased, the applicant/licensee shall file with the Department a certificate of insurance on a form prescribed by the Department, which shall indicate that the licensee has adequate property insurance covering grain in its possession or custody and adequate liability, property, theft, hazard and workers' compensation insurance and that the licensee is the named beneficiary on the policy.

 

b)         The legal name and address of the licensee and location of each warehouse in the insurance policy shall correspond with the information given in the application.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.40  Required Records

 

a)         Daily Position Record

 

1)         A daily position record means a written or electronic document that is maintained on a daily basis for each commodity.  Postings for each day shall reflect actual changes in inventory for that business day.  The daily position record shall provide for a separate accounting for the following:

 

A)        Summary stock record showing total bushel amount of grain received, grain loaded out of the warehouse, adjustments, total grain inventory in the warehouse, redeposited grain and total of the grain inventory in the warehouse plus redeposited grain.

 

B)        Negotiable warehouse receipts obligations, total bushels covered by receipts issued and total bushels covered by receipts cancelled.

 

C)        Non-negotiable warehouse receipts obligations, total bushels covered by receipts issued and total bushels covered by receipts cancelled.

 

D)        Non-receipted storage obligations including total bushel increases and total bushel decreases.

 

E)        Non-receipted company owned grain.

 

F)         Inventory bushel adjustments to the daily position record as set forth in subsection (a)(2).

 

2)         Warehousemen may make adjustments to their inventory as long as documentation is available to substantiate the following types of adjustments:

 

A)        Adjustments to shrink calculations;

 

B)        Adjustments for error correction;

 

C)        Adjustments based upon certified public accountant inventories;

 

D)        Adjustments based upon weighed inventories.

 

3)         Licensees must maintain a master daily position record combining all locations, inventory and storage obligations in the case of multiple locations.

 

4)         Actual grain inventories must at all times be in balance with the summary stock quantity as indicated in the daily position record.

 

b)         Long/Short Position Record

Each grain dealer shall maintain a master long/short risk position record, as either a written or electronic document, that combines all marketing activity of all locations each business day.  The risk position record shall at a minimum contain the net position; grain owned; grain sold and shipped on price later contracts that have not been priced; open cash purchase contracts, including purchase contracts issued and purchase contracts cancelled; all futures purchased or sold; grain in transit not sold; grain owned and stored in other grain warehouses; grain purchased and received on price later contracts that have not been priced; open cash sales contracts, including sales contracts issued and sales contracts cancelled; and any options purchased or sold.  The position record shall also contain a comments section.  The grain dealer shall note in the comments section any actions taken to regain a balanced position as required in Section 10-10 of the Code.  The comments shall, at a minimum, indicate bushel amounts, name of buyer/seller/broker and approximate times of transactions.

 

c)         Scale Tickets

 

1)         Scale tickets shall be pre-numbered by an independent printer, or, in the case of computer generated scale tickets, numbered consecutively by the computer recordkeeping system.

 

2)         Scale tickets shall be issued in numerical sequence.  All scale tickets must be accounted for numerically either by paper or electronic documentation.  A separate series of scale tickets shall be used for each location that has scales under the licensee's control over which grain is received.

 

d)         Cross-reference

All accounts and records relating to grain operations are to be properly cross-referenced.  An adequate system of cross-reference shall exist beginning at the time of delivery, clearly indicating the current status of the grain and changes in that status, and indicating the final disposition of the grain.

 

e)         Settlement and/or Receiving Sheets

Settlement and/or receiving sheets shall either be pre-numbered by an independent printer or, in the case of computer generated sheets, numbered consecutively by the computer recordkeeping system.  The licensee shall use settlement and/or receiving sheets in numerical sequence and account for all settlement and/or receiving sheets either by paper or electronic documentation. Settlement and/or receiving sheets shall contain evidence of the method of settlement, such as check number, warehouse receipt number, or other evidence of settlement.  Settlement and/or receiving sheets, both open and closed, shall be filed in a manner to be readily available for examination purposes, such as alphabetical or numerical.  If price later contracts are used, the settlement/receiving sheets shall clearly indicate the price later contract numbers against which grain is to be applied.

 

f)         Safeguarding and Retention of Records

The licensee shall provide a secure place at each licensed location and at the principal office for storage of all records pertaining to the operation of the licensee.  The records shall be kept current and made available for inspection by Department personnel at the principal office of the licensee and at each licensed location.  The records shall be retained by the licensee for a period of not less than 2 years from the closing date of any transaction.

 

g)         Grain Inventory Accountability Report

A grain inventory accountability report means a written or electronic document that is maintained monthly for each commodity with an option to forgo one month’s measurement per calendar year.  In addition to that option, a licensee may also submit a written request to the Department for a waiver setting forth its justification for being unable to complete the monthly grain inventory accountability report.  The Department may grant a waiver, at its discretion, for good cause shown.  Good causes are those that may jeopardize the health or safety of the licensee's employees, including acts of nature.  The monthly grain inventory accountability report shall provide for a separate accounting for the following:

 

1)         The total grain inventory contained within each licensed storage structure.

 

2)         The bin worksheets signed by the individual who collected the data provided on the bin worksheets.

 

3)         The inventory calculations derived from the data provided in the bin worksheets.

 

4)         A monthly comparison of the total grain inventory accountability report of each commodity to the daily position record of total stock of that same commodity.

 

(Source:  Amended at 47 Ill. Reg. 5939, effective April 12, 2023)

 

Section 281.50  Price Later Contracts

 

a)         Prescribed Form

A price later contract executed between a licensee and a producer shall be on a prescribed form that has been approved by the Department.  A licensee may issue a price later contract by way of a written price later contract document, an EPLC, or both. All price later contracts shall include, but need not be limited to, the following information:

 

1)         The legal name and address of the licensee;

 

2)         The legal name of the seller;

 

3)         The bushel amount of grain to be covered by the contract;

 

4)         The grade and commodity of grain to be covered by the contract;

 

5)         The dates of delivery of the grain to be covered by the contract;

 

6)         The method of pricing;

 

7)         A section to indicate service charges, advances or other terms;

 

8)         The following statements:

 

A)        Title to the grain covered by this contract passes to buyer at the time of delivery.

 

B)        Buyer is required to maintain grain assets and price later, storage and drying service charges equal to 90% of its price later obligations.

 

C)        Price later grain is not stored grain for the seller.  In the event of a failure, the contract is the basis for a grain dealer claim.  The maximum coverage afforded by the Illinois Grain Insurance Fund is 85% of valid grain dealer claim amounts up to a maximum of $250,000 per claimant. The maximum payment per claimant covers all contracts that in any way can be related or tied to a person or entity, whether in full or in part.

 

D)        This contract shall cease to be the basis of a valid claim, and seller shall not be entitled to any recovery:

 

i)          When both the date of completion of delivery and the date of pricing of the grain are in excess of 160 days before the date of failure;

 

ii)         If the later of the date of execution of the contract or the date of delivery of the grain covered by the price later contract occurred more than 365 days before the date of failure (The phrase "the later of the date" means the date closest to the date of failure, and the phrase "date of delivery" means the date of the last delivery of grain to be applied to the quantity requirement of the price later contract.);

 

iii)        If the claim is based upon or acquired by fraudulent or illegal acts of the seller.

 

E)        The execution of subsequent price later contracts for the grain previously covered by a price later contract shall not extend coverage of a claim beyond the original 365 days.

 

F)         The contract must be signed by both parties within 30 days after the last date of delivery or, if an EPLC is used, the EPLC must be maintained as an electronic record containing electronic signatures and security procedures for both parties within 30 days after the last date of delivery.  If the contract is not signed by both parties within 30 days after the last date of delivery or if the EPLC is not maintained as an electronic record containing electronic signatures and security procedures for both parties within 30 days after the last date of delivery, then the grain will be priced at the market price of the grain at the close of the next business day after the 29^th day.

 

G)        Within 5 business days after the seller selects a price for all or any part of the grain represented by the price later contract, the buyer shall settle and mail to the seller full settlement for the priced grain;

 

9)         A section indicating the signature, electronic or otherwise, and date of signature for both the seller and buyer's representative;

 

10)         The contract shall contain a schedule of settlements and basis activity for the grain to be covered by the contract.

 

b)         Electronic Price Later Contracts

 

1)         An EPLC issued in accordance with the Code and this Part shall not be denied legal effect, validity, or enforceability on the grounds that the information is generated, sent, received or stored by electronic or similar means.

 

2)         If a grain dealer licensed under the Code elects to issue EPLCs and the producer prefers a written price later contact, the grain dealer shall cancel the EPLC and reissue a written price later contract.  The reissuance of a price later contract does not extend the coverage afforded by the Illinois Grain Insurance Fund.

 

c)         Issuance

 

1)         A price later contract shall be written or in electronic format and shall be issued by a person authorized by the Department to issue those contracts.  The Department shall authorize persons to issue price later contracts if they are issued in accordance with the Code and this Part and if they have registered in accordance with Section 10-15 of the Code.

 

A)        All price later contracts shall be:

 

i)          Issued only for licensees.

 

ii)         Numbered consecutively either at the time of printing or through the control of a computer generated system.

 

B)        A complete record of contracts issued shall be retained for 6 years, showing for whom issued, the number issued, and the consecutive numbers that were issued on the contracts.

 

2)         Authorized printers shall notify the Department of the number of price later contracts printed, when they were printed, for whom they were printed and the consecutive numbers printed on the contracts.

 

d)         Separate Series

Each location at which price later contracts are issued shall have its own identifiable series of price later contracts.

 

e)         Requirements for Use of Price Later Contracts

 

1)         Only one commodity per contract.

 

2)         The bushel quantity of a price later contract shall not be increased.

 

3)         Price later contracts are to be executed with the original copy or EPLC maintained by the dealer and a copy available to the seller, if requested.

 

4)         Unless issued by EPLCs, the dealer shall maintain the updated and signed contracts in numerical order.

 

5)         No storage charges shall be made with respect to any commodity purchased by price later.  A service charge may be assessed.

 

6)         If issued by written price later contract, a rollover shall be documented with the initials of both parties and dated by both parties.  If by EPLC, a rollover shall be documented by electronic signature and security procedure on the contract.

 

7)         Grain assets included in the assets required to meet 90% of outstanding price later obligations do not have to be commodity specific.

 

f)         Pre-delivery Price Later

When a price later contract is used as a pre-delivery contract, the original bushel amount shall be adjusted down to reflect the actual amount of grain delivered against the contract.

 

(Source:  Amended at 47 Ill. Reg. 5939, effective April 12, 2023)

 

Section 281.60  Warehouse Receipts

 

a)         Warehouse Receipt Forms

            Warehouse receipts shall be either a written or an electronic document and must comply with the requirements of Article 7 of the Uniform Commercial Code, except to the extent inconsistent with the Code, in which instance the provisions of the Code prevail.  A licensee may issue warehouse receipts by use of a written warehouse receipt system, an electronic warehouse receipt system, or both.

 

1)         Paper warehouse receipts shall include the following information:

 

A)        Class of warehouse (I or II).

 

B)        The legal name of the entity operating the warehouse.

 

C)        If a license covers multiple locations, at which location delivery was made and date of delivery.

 

D)        The kind and the grade factors of the grain as prescribed by the Official Grain Standards (7 CFR 810, January 2007).

 

E)        The number of bushels stored.

 

F)         The words "Negotiable" or "Non-negotiable" according to the nature of the receipt, conspicuously printed or stamped on the receipt.

 

2)         Electronic Warehouse Receipts (EWR)

 

A)        An EWR must be in the format prescribed in the applicable provider agreement.

 

B)        An EWR issued in accordance with the Code shall not be denied legal effect, validity, or enforceability on the grounds that the information is generated, sent, received or stored by electronic or similar means.

 

C)        A warehouseman shall not be required to issue a warehouse receipt in electronic form.

 

D)        If a warehouseman licensed under the Code elects to issue EWRs, and if the depositor or other holder prefers a paper receipt, the warehouseman shall cancel the EWR and reissue a paper receipt.

 

E)        A warehouseman intending to issue or issuing EWRs under the Code shall:

 

i)         issue an EWR through only one authorized provider annually;

 

ii)        inform the Department of the identity of its provider 60 calendar days in advance of first issuing an EWR through that provider.  The Department may waive or modify this 60-day requirement;

 

iii)       before issuing an EWR, request and receive from FSA or the Department a range of consecutive warehouse receipt numbers that the warehouseman will use consecutively for issuing their EWRs;

 

iv)       cancel an EWR only when it is the holder of the EWR;

 

v)        receive written authorization from FSA at least 30 calendar days before changing providers.  Upon authorization, a warehouseman may request its current provider to transfer, and that provider shall transfer, its EWR data from the current provider's CFS to the CFS of the authorized provider it selects;

 

vi)       notify all holders of EWRs in the CFS at least 30 calendar days before changing providers, unless otherwise allowed or required by FSA; and

 

vii)       For purposes of subsection (a)(2)(E)(iv), the warehouseman is considered a "holder" solely for the purpose of canceling an electronic warehouse receipt on the electronic warehouse receipt system and the warehouseman shall in no way be considered the owner of the grain that was covered by the cancelled electronic warehouse receipt, absent evidence of sale of that grain to the warehouseman.

 

F)         EWR Rights and Obligations

An EWR establishes the same rights and obligations with respect to an agricultural product as a paper warehouse receipt and possesses the following attributes:

 

i)          The holder of an EWR will be entitled to the same rights and privileges as the holders of a paper warehouse receipt.

 

ii)         Only the current holder of the EWR may transfer the EWR to a new holder. 

 

iii)        The identity of the holder must be kept confidential by the provider.

 

iv)        Only one person may be designated as the holder of an EWR at any one time.

 

v)         A warehouse operator may not issue an EWR on a specific identity-preserved or commingled lot of grain or any portion thereof while another valid warehouse receipt representing the same specific identity-preserved or commingled lot of grain remains not cancelled.  No two warehouse receipts issued by a warehouseman may have the same warehouse receipt number or represent the same lot of grain.

 

vi)        Holders and warehousemen may authorize any other user of their provider to act on their behalf with respect to their activities with this provider.  This authorization must be in writing and acknowledged and retained by the warehouseman and provider.

 

b)         Printing

 

1)         Warehouse receipts, other than EWRs, shall be printed by a person authorized to print those receipts by the Department.  The Department shall authorize persons to print warehouse receipts if they are printed in accordance with the Code and this Part and if they have registered in accordance with Section 10-25 of the Code.  All warehouse receipts shall be:

 

A)        Printed only for licensees.

 

B)        Numbered consecutively either at the time of printing or through the control of a computer generated system, and the numbers shall not be duplicated.

 

C)        A complete record of receipts printed shall be retained by the printer for 5 years, showing for whom printed, the number printed, and the consecutive numbers that were printed on the receipts.

 

2)         A duplicate copy of any invoice rendered for printing warehouse receipts shall be forwarded by the printer to the Department at the same time as billing is made to the warehouseman.  The invoice shall show for whom printed, the consecutive numbers that were printed on the receipts, type of receipt (whether negotiable or non-negotiable), and number of receipts printed.

 

c)         Paper Warehouse Receipts as Collateral

 

1)         Warehousemen issuing negotiable warehouse receipts for collateral purposes shall properly endorse those receipts on the reverse to the secured party.

 

2)         The warehouseman's obligation represented by an outstanding warehouse receipt endorsed for collateral purposes shall not be cancelled until the warehouseman has the outstanding receipt back in its possession and it has been properly cancelled.  The warehouseman may cancel the outstanding obligation represented by a warehouse receipt in lieu of having the actual receipt in its possession, provided that the secured party has presented the warehouseman with a written confirmation of release of the warehouse receipt.  The confirmation shall at a minimum contain the date of release, the receipt numbers and the signature of the secured party warehouse receipt holder.  The confirmation shall be provided by written or electronic documentation.

 

d)         Electronic Warehouse Receipts as Collateral

 

1)         Warehousemen issuing a negotiable EWR for collateral purposes shall properly endorse the receipt to the secured party.

 

2)         The warehousemen's obligation represented by an outstanding EWR shall be cancelled upon transfer by the holder.

 

e)         Issuance and Cancellation of Paper Warehouse Receipts

 

1)         A negotiable or non-negotiable warehouse receipt shall be issued by the warehouseman to the depositor, on demand by the depositor, for grain delivered into storage.  When no warehouse receipt was originally issued to the depositor, except for grain bank accounts, the warehouseman shall issue a warehouse receipt on the stored grain prior to the next harvest season. In the case of a Class II warehouseman, only non-negotiable warehouse receipts shall be issued.

 

2)         On the date that a printed warehouse receipt is cancelled, the receipt shall be plainly marked across its face with the word "cancelled".  The cancelled receipt shall also be marked with the date and the name of the person cancelling the receipt, the means by which the receipt was cancelled (i.e., check number, monetary wire transfer or delivery from storage) and shall thereafter be void.  The daily position record shall accurately reflect the date of cancellation of all warehouse receipts.

 

f)         Numbering of Receipts

If warehouse receipts are to be issued from multiple locations or for specific commodities, the warehousemen shall maintain separate numerical series of warehouse receipts for each location or commodity.  The receipts must have an 8 digit number with the first (leftmost) digit being a numeric prefix to indicate the specific location or commodity.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.65  Electronic Document Providers

 

a)         Electronic document provider systems must allow for electronic data interface with Department computer systems to electronically transfer warehouse receipts, EPLCs, and/or other electronic document information for examination purposes.

 

b)         Providers who operate and maintain a CFS in reference to electronic documents, including EWRs, must meet all USDA requirements pursuant to 7 CFR 735 (2008) and must maintain USDA-approved provider status to be eligible as a provider for licensees.  In order to be authorized by the Director, providers must also:

 

1)         register with the Department and pay an annual registration fee of $100;

 

2)         provide all documentation requested by the Department to confirm that the warehouse receipt provider is a USDA-approved provider in good standing;

 

3)         maintain and retain a complete record of EWRs and EPLCs for 6 years, showing for whom issued, the number issued and the consecutive numbers that were issued on the EWRs and EPLCs;

 

4)         immediately notify the Department of any instance in which the provider is required to notify the USDA or a user of any breach of security or confidentiality concerning data, loss of operations, cancellation of insurance or other compromise, disruption or infringement of its operations;

 

5)         maintain adequate levels of insurance and name the Director as an additional insured;

 

6)         be authorized to transact business in the State of Illinois;

 

7)         consent to jurisdiction in the State of Illinois and venue in Sangamon County;

 

8)         maintain records, make reports and provide to the Department the documentation, records and reports requested by the Director, free of charge to the Department; and

 

9)         comply in all respects with Illinois law, including but not limited to the Code and this Part.

 

c)         A provider shall submit to the Department copies of its current schedule of charges and rates for services before they are to become effective.  A provider shall also submit to the Department 60 calendar days notice of its intent to change rates.

 

d)         A provider shall submit to the Department advance notice of any changes to or new agreements with users.

 

e)         Any person authorized by the Director to issue EWRs, EPLCs, or other electronic documents shall maintain records and make reports requested by the Director.

 

f)         A provider's ability to issue EWRs is contingent on approval by FSA, and suspension or termination by FSA of the provider is an automatic suspension or termination of the authority granted by the Department for the provider to operate in the State of Illinois.  A provider shall be required to immediately notify the Department of any suspension or termination of approval as a provider by FSA.

 

g)         After providing notice and opportunity for hearing in accordance with 8 Ill. Adm. Code 1, the Director may suspend authorization for a provider for a material violation of, or failure to comply with, any provision of the Code (including any regulations promulgated under the Code); failure to perform authorized services in an acceptable manner; failure to maintain security of the CFS; or commission of fraud against the Department, FSA or any depositor.

 

(Source:  Amended at 47 Ill. Reg. 5939, effective April 12, 2023)

 

Section 281.70  Types of Storage

 

a)         Application to Amend Licensed Storage Capacity (Permanent, Temporary and Emergency)

 

1)         Prior to increasing any type of storage capacity, or decreasing permanent storage capacity, the licensee shall submit an application to amend the licensed storage capacity and provide the following information:

 

A)        The licensee's legal name and business address;

 

B)        Description of each storage structure that is being added to, or removed from, the licensed storage capacity;

 

C)        The storage capacity of each warehouse structure proposed to be added or deleted;

 

D)        A certificate indicating that insurance coverage has been obtained on all space added to the licensed storage capacity; and

 

E)        A filing fee of $100.

 

2)         It is not necessary to submit an application or filing fee to decrease approved temporary or emergency storage requests that expire within a specified period.

 

b)         Permanent Storage

The Department shall issue a license for permanent storage capacity or approve the application to amend the licensed permanent storage capacity of a licensee if all of the licensing requirements to obtain, maintain or amend a license as set forth in the Code and this Part have been met, and if the warehouse meets the following requirements:

 

1)        The grain storage structures are owned or leased by the applicant/warehouseman.

 

2)         Grain is protected from weather elements (i.e., a floor of concrete, asphalt, wood or metal or a material having similar structural qualities).

 

3)         Each grain storage structure is covered by a permanent, waterproof roof.

 

4)         The grain storage structure has rigid sidewalls (e.g., concrete, wood or metal or a material having similar structural qualities).

 

5)         All grain storage structures that are connected by legs, pipes, belts or other fixed devices that transport grain are included in the licensed space.

 

                                                                         

c)         Temporary Storage

 

1)         Extensions of temporary storage approval may be granted by the Department provided:

 

A)        The warehouseman demonstrates that there is good cause for an extension.

 

B)        The request for extension is received at least 2 weeks in advance of the expiration date of the temporary storage approval.

 

2)         Extensions for the use of temporary storage shall be granted in increments not to exceed 90 days.

 

d)         Emergency Storage

 

1)         The Department shall approve the use of emergency storage, provided the warehouseman demonstrates that an emergency exists.

 

2)         Emergency storage is considered to be any storage that does not meet the criteria of permanent or temporary storage (i.e., uncovered ground piles, structures without rigid sidewalls, etc.).

 

3)         Emergency storage approval shall not exceed 3 months.  The length of approval shall be dependent on the ability of the warehouseman to maintain the quantity and quality of the grain in storage, considering weather conditions, exposure to weather elements, security, etc.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.80  Failure; Claims; Liquidation

 

a)         In the event of a failure, notices shall be posted at all facilities of the licensee by the Department and at all office locations of the licensee.  Notices shall contain the following information:

 

1)         The name of the licensee, the grain warehouse license number and the grain dealer license number.

 

2)         The effective date the license was terminated, suspended, revoked or surrendered, or renewal was denied.

 

3)         The licensee has been ordered to cease and desist doing business as a licensed grain warehouseman and grain dealer in the State of Illinois.

 

4)         Persons may contact the Illinois Department of Agriculture, Bureau of Warehouses, P.O. Box 19281, Springfield IL 62794-9281, (800)654-0082.

 

b)         Liquidating Licensee

 

1)         Procedure for Determining the Value of Grain on the Date of Failure.

The Department shall use an average of the cash bid prices, as solicited from grain dealers located within the market area of the failed licensee, and the actual cash bid that would have been offered by the failed licensee on the date of closing, for all grain stored or unpriced as indicated by the evidence of storage or sale of grain, less transportation, handling costs and discounts.  The schedule of discounts (which include, but are not limited to, moisture; foreign material; test weight; heating; musty, sour or commercially objectionable foreign odor; heat damage; weevil damage; splits and damaged kernels) of the failed licensee shall be used by the Department to determine discounts to be assessed against the valid claimant.  For all grain delivered, sold and priced prior to the date of failure, the price per bushel shall be agreed upon by the failed licensee and the claimant.

 

2)         Procedure for the Sale of Grain from a Failed Warehouse and/or Grain Dealer.

The Department shall solicit at least 3 competitive bids from within the market area of the failed licensee.  The Department shall solicit quotations for market discounts (i.e., moisture; foreign material; test weights; heating; musty, sour or commercially objectionable foreign odors; heat damage; weevil damage; splits and damaged kernels) from each bidder who submits a bid. The Department shall consider the following factors in determining who shall purchase the grain:

 

A)        The bid price for the grain.

 

B)        Transportation costs to be deducted from the bid price for the grain.

 

C)        Market discounts that will be applied against the bid price for the grain.

 

D)        The amount of the grain that the bidder can take delivery of during the contracted time period for transporting the grain.

 

c)         Claims Procedure

 

1)         Claimants shall file their claims at the location indicated in the public notice or mail claims to the Department of Agriculture, Bureau of Warehouses, P.O. Box 19281, Springfield IL 62794-9281.

 

2)         Claim forms will be made available at the locations of the failed licensee.

 

3)         All scale tickets, settlement sheets, warehouse receipts and contracts must be submitted with the claim.

 

4)         All original warehouse receipts shall be submitted to the Department prior to receiving payment of a claim.

 

5)         All claims must be signed by the claimant whose name appears on the claim.

 

6)         All claims must have a tax identification number affixed for claims verification purposes.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.90  Miscellaneous

 

a)         Business Hours

            Temporary interruptions of the posted business days and hours shall be posted in a conspicuous place at the place of business.  The Department may grant seasonal business days and hours to those businesses that operate only during specific periods.  Any deviations on business hours pursuant to Section 5-25(a)(2) of the Code shall be approved by the Department.

 

b)         Grain Bank

 

1)         Grain deposited for grain bank purposes shall be accounted for on a separate record containing the same informational requirements as a non-negotiable warehouse receipt, or on a non-negotiable warehouse receipt listing each lot of grain deposited and withdrawn, showing a net balance.

 

2)         When a non-negotiable warehouse receipt is issued for grain in a grain bank, the reverse side of the original warehouse receipt shall be used to record withdrawals and additional deposits and the warehouse receipt shall be retained by the warehouseman.

 

3)         No deposit shall be recorded that would increase the balance of the grain in the grain bank to an amount that would exceed the original net bushels on the face of the non-negotiable warehouse receipt.

 

c)         Posting Bin Chart and Diagram

The warehouseman shall post in a conspicuous place in the office of each warehouse a bin chart and diagram, as supplied by the Department, showing the location, bin number and capacity of all bins and sections of the warehouse.

 

d)         Transfer and Redeposit

A warehouseman forwarding stored grain to another warehouseman for redeposit shall obtain a non-negotiable warehouse receipt as evidence of the forwarded grain.

 

e)         Grain Dealer Examination Fee

The first examination performed each calendar year shall be billed at a rate of .0003 x the total dollar amount paid to producers the last fiscal year with a minimum fee of $150 and a maximum of $400.  When more than one location is included in the exam, a fee of $50 is required for each additional certificate of a license.  For each subsequent examination in a calendar year, the grain dealer shall pay a $50 fee for each license examined.

 

f)         Collateral and Guarantees

Pursuant to Section 15-30(d) of the Code, the Department may require that an applicant or licensee provide the Department with personal, corporate or other related person guarantees.  The Department may require that a guarantee be executed by any related person to an applicant or licensee.  All guarantees shall be executed for a minimum of $500,000.  Guarantees shall be executed for a maximum amount not to exceed the dollar value of annual grain purchases or the dollar value of the highest bushel storage obligation during the past year.

 

g)         Grain Seller Assessment

The Department shall give written notice to all licensees of when an assessment is to begin and end.  The assessment established in Section 5-30 of the Code shall be collected by licensees at the time of settlement, without regard to the date the grain was sold to the licensee.  The collection and remittance of assessments from first sellers of grain are the sole responsibility of the licensee to whom the grain is sold and shall be reported by the licensee on a form prescribed by the Department. The prescribed form shall include, but need not be limited to, the following information:

 

1)         Legal name and address of licensee;

 

2)         Grain dealer license number;

 

3)         Grain dealer certificate license number;

 

4)         County;

 

5)         Business telephone;

 

6)         Period of report;

 

7)         Commodity;

 

8)         Number of bushels assessed;

 

9)         Net market value of assessed bushels;

 

10)        Rate of assessment;

 

11)        Total assessment; and

 

12)        Certification of licensee.

 

h)         Lender Assessment

The Department shall give written notice to all licensees of when an assessment is to begin and end.  The assessment established in Section 5-30 of the Code shall be based on the bushels represented by a warehouse receipt issued by a licensee from an Illinois location held as security for a loan, including, without limitation, the advancing of money or other value to, or for the benefit of, a licensee upon the licensee's issuance or negotiation of a grain warehouse receipt and pursuant to, or in connection with, an agreement between the licensee and a counter-party for the repurchase of the grain by the licensee or designee of the licensee.  It is the licensee's responsibility to inform its lenders and/or other persons of the onset of an assessment for which they might be liable.  Each quarterly assessment shall be paid and reported by the lender or its designee on a form prescribed by the Department.  The prescribed form shall include, but need not be limited to, the following information:

 

1)         Legal name and address of licensee;

 

2)         Lender name and address;

 

3)         Grain warehouse license number;

 

4)         County;

 

5)         Business telephone;

 

6)         Period of report;

 

7)         Warehouse receipt number;

 

8)         Commodity;

 

9)         Number of bushels assessed;

 

10)        Applicable commodity price;

 

11)        Number of days tendered as collateral;

 

12)        Rate of assessment;

 

13)        Lender assessment multiplier;

 

14)        Total assessment; and

 

15)        Certification of licensee.

 

(Source:  Amended at 33 Ill. Reg. 1647, effective January 16, 2009)

 

Section 281.100  Severability

 

If any provision of this Part or its application to any person or under any other circumstances is adjudged invalid, that adjudication does not affect the validity of this Part as a whole or of any portion not adjudged invalid.

 

(Source:  Added at 33 Ill. Reg. 1647, effective January 16, 2009)