Business meetings on Packers and stockyards act of 1921, as amended

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Business meetings on Packers and stockyards act of 1921, as amended
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United States -- Congress. -- House. -- Committee on Agriculture
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Table of Contents
    Front Cover
        Page i
        Page ii
    Table of Contents
        Page iii
        Page iv
    Friday, February 6, 1976
        Page 1
    H.R. 8410, a bill to amend the Packers and stockyards act of 1921, as amended, and for other purposes
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
    Committee print No. 2
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
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        Page 55
        Page 56
    Thursday, February 19, 1976
        Page 57
        Page 58
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        Page 60
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        Page 77
        Page 78
        Page 79
        Page 80
    Tuesday, March 30, 1976
        Page 81
    H.R. 8410 with suggested changes
        Page 82
        Page 83
        Page 84
        Page 85
        Page 86
        Page 87
        Page 88
        Page 89
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        Page 120
    Wednesday, March 31, 1976
        Page 121
        Page 122
        Page 123
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        Page 125
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        Page 144
        Page 145
        Page 146
        Page 147
    Back Cover
        Page 148
Full Text



94th Congress
2d Session


COMMITTEE PRINT


BUSINESS MEETINGS

ON

PACKERS AND STOCKYARDS APT "6'O
AS AMENDED Q


February 6


H.R. 8410
and 19, and March 30 afidA31, 1976

Public Law 94-410


COMMITTEE ON


AGRICULTURE


U.S. HOUSE OF REPRESENTATIVES
NINETY-FOURTH CONGRESS
SECOND SESSION


DECEMBER 1976


Printed for the use of the Committee on Agriculture


U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1976


14


79-314 0
















COMMITTEE ON AGRICULTURE
THOMAS S. FOLEY, Washington, Chairman


W. R. POAGE, Texas, Vice Chairman
E DE LA GARZA, Texas
JOSEPH P. VIGORITO, Pennsylvania
WALTER B. JONES, North Carolina
ED JONES, Tennessee
JOHN MELCHER, Montana
DAWSON MATHIS, Georgia
BOB BERGLAND, Minnesota
GEORGE E. BROWN, JR., California
DAVID R. BOWEN, Mississippi
CHARLES ROSE, North Carolina
JERRY LITTON, Missouri 1
JOHN BRECKINRIDGE, Kentucky
FREDERICK W. RICHMOND, New York
RICHARD NOLAN, Minnesota
JAMES WEAVER, Oregon
ALVIN BALDUS, Wisconsin
JOHN KREBS, California
TOM HARKIN, Iowa
JACK HIGHTOWER, Texas
BERKLEY BEDELL, Iowa


WILLIAM C. WAMPLER, Virginia,
Ranking Minority Member
KEITH G. SEBELIUS, Kansas
PAUL FINDLEY, Illinois
CHARLES THONE, Nebraska
STEVEN D. SYMMS, Idaho
JAMES P. JOHNSON, Colorado
EDWARD R. MADIGAN, Illinois
PETER A. PEYSER, New York
MARGARET M. HECKLER, Massachusetts
JAMES M. JEFFORDS, Vermont
RICHARD KELLY, Florida
CHARLES E. GRASSLEY, Iowa
TOM HAGEDORN, Minnesota
W. HENSON MOORE, Louisiana


MATTHEW F. McHUGH, New York
GLENN ENGLISH, Oklahoma
FLOYD J. FITHIAN, Indiana
JOHN W. JENRETTE, JR., South Carolina
NORMAN E. D'AMOURS, New Hampshire '
RAY THORNTON, Arkansas '

PROFESSIONAL STAFF
FOWLER C. WEST, Staff Director
ROBERT M. BOR, Counsel
HYDE H. MURRAY, Counsel
JOHN R. KRAMER, Special Counsel
L. T. EASLEY, Press Assista~t

1Deceased Aug. 3, 1976.
2 Resigned from committee Apr. 8, 1976.
Assigned Dec. 17, 1975.
(II)












CONTENTS


Page
Friday, February 6, 1976 --------------------------------------------1
H.R. 8410, a bill to amend the Packers and Stockyards Act of 1921, as
amended, and for other purposes ----------------------------------- 2
Committee Print No. 2---------------------------------------------- 14

Thursday, February 19, 1976 -----------------------------------------57

Tuesday, March 30, 1976 --------------------------------------------81
H.R. 8410 with suggested changes ------------------------------------82

Wednesday, March 31, 1976 -----------------------------------------121
(M)



















Digitized by the Internet Archive
in 2013













http://archive.org/detaiIs/meeti ngsO0u nit









PACKERS AND STOCKYARDS ACT OF 1921,
AS AMENDED


FRIDAY, FEBRUARY 6, 1976
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON LIVESTOCK AND GRAINS OF THE
'COMMITTEE ON AGRICULTURE,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10 a.m., in room 1301,
Longworth House Office Building, Hon. W. R. Poage, (chairman of
the subcommittee) presiding.
Present: Representatives Poage, Melcher, Hightower, Bedell,
English, Nolan, Thornton, Sebelius, Findley, and Thone.
Staff present: Robert M. Bor and Hyde H. Murray, counsels;
William A. Imhof and John E. Hogan, associate counsels; John Baize
and Alan Gray, staff -consultants, Subcommittee on Livestock and
Grains; Leon Geyer, staff consultant,' Subcommittee on Domestic
Marketing and Consumer Relations; Glenda Temple, staff assistant.
Mr. POAGE. The committee will please come to order.
The Chair notes that a quorum is not present.
Of course, any member may make 'a point of order at any time that
a quorum is not present.
I believe we had 'better proceed Unless someone wants to make a point
of order.
We have been trying for some months to arrive at legislation that
would give -protection to the sellers of livestock. This is for packers
in regulated markets. We have had legislation introduced.
We have had a good many suggestions. Finally, we have come up
with Committee Print No. 2. Hopefully, it contains some of these
things that have been suggested.
('The bill H.R. 8410, as introduced, and Committee Print No. 2
follows:)
(1)





2

94THl CONGRESS
1ST SESSION H. Ri 841 0




IN THE HOUSE OF REPRESENTATIVES
JULY 8,1975
Mr. THONE (for himself and Mr. BERGLAND) introduced the following bill;
which was referred to the Committee on Agriculture




A BILL
To amend the Packers and Stockyards Act of 1921, as amended,
and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 ties of the United States of America in Congress assembled,

3 That the proviso in the paragraph designated "Packers and
4 Stockyards Act," under the heading "MARKETING

5 SERVICE," in the Act of July 12, 1943 (57 Stat. 422; 7
6 U.S.C. 204), is amended by striking out "market agency

7 and dealer" and inserting in lieu thereof "market agency (as
8 defined :n title III of the Act), every packer (as defined in

9 title II of the Act) in connection with its livestock purchas-
10 ing operations, and every other person operating as a dealer

11 (as defined in title III of the Act)".
I








2
1 SEC. 2. Section 201 of said Packers and Stockyards Act
2 (7 U.S.C. 191) is amended to read:
3 "SEC. 201. When used in this Act the term 'packer'
4 means any person engaged in the business (a) of buying or
5 otherwise acquiring in commerce livestock or poultry for
6 purposes of slaughter, or (b) of manufacturing, processing,
7 or preparing in any manner meats, meat food products, or
8 edible poultry products, for sale or shipment in commerce,
9 or (c) of buying or otherwise acquiring or selling or other-
10 wise marketing meats, meat food products, livestock products
11 in unmanufactured form, poultry, or poultry products, in
12 commerce, on a commission basis or otherwise, either on his

13 own account or as the employee or agent of the vendor or
14 purchaser: Provided, however, That nothing in this section

15 shall affect the jurisdiction of the Federal Trade Commission
16 with respect to retail sales of meat, meat food-products, live-
17 stock products in unmanufactured form, or poultry products
18 as provided in section 406 of this Act.".

19 SEC. 3. Sections 202 and 312 (a) of said Packers and
20 Stockyards Act (7 U.S.C. 192 and 213 (a)) are amended
21 by deleting the phrase "in commerce" wherever it appears
22 in said sections, and by deleting the commas immediately
23 before and following the phrase "in commerce" in sections'
24 202 (b) and 312 (a) of said Act (7 U.S.C. 192 (b) and
25 213 (a)).








3

1 SEc. 4. That the proviso ili the paragraph designated
2 "Packers and Stockyards Act" under the heading "MAR-
3 KETING SERVTICE" in the Act of July 12, 1943 (57
4 Stat. 422; 7 U.S.C. 204), is further amended by adding at
5 the end thereof a new sentence as follows: "If fie Secretary
6 finds any packer is insolvent, he may after notice and hearing
7 issue an order under the provisions of section 203 requiring
8 such packer to cease and desist from purchasing livestock or
9 poultry while insolvent, or while insolvent except under such
10 conditions as the Secretary may prescribe to effectuate the
11 purIposes of the Act.".
12 SEC. 5. Said Packers and Stockyards Act is ftirther
13 amended 1)y redesignating section 408 as section 411 and

14 by adding to the Act a new section 408 to read as follows:
15 "SEC. 408. Whenever the Secretary has reason to be-
16 lieve that any person subject to this Act, (a) with respect
17 to any transaction subject to the Act, has failed to pay or
18 is iiii'llle to pay for hiestock, meats, meat food products,

19 live st ,ck products in unmanufactured form, poultry, or pouIl-
20 try products, or has failed to remit to the person entitled
21 thereto the net proceeds from the sale of amy such comi-
22 m(,dity sold on a coininission basis; or (1)) has operated
23 while insolvent or in violation of the Act in a manner which
24 nmay reasonably le expected to cause irreparable damage to
25 a other person; or (c) does not have the required bond,







4
1 and that it would be in the public interest to enjoin such

2 person from operating subject to this Act or enjoin him
3 from operating subject to this Act except under such con-
4 ditions as would protect vendors or consignors of such com-

5 modities or other affected persons, until complaint under

6 this Act is issued and dismissed by the Secretary or until
7 order to cease and desist made thereon by the Secretary has

8 become final and effective within the meaning of this Act
9 or is set aside on appellate review of the Secretary's order,

10 the Secretary may notify the Attorney General, who may
11 apply to the United States district court for the district in

12 which such person has his principal place of business or in

13 which lie resides for a temporary injunction or restraininv
14 order. When needed to effectuate the purposes of this section,

15 the court shall, upon a proper showing, issue a temporary

16 injunction or restraining order, without bond. Attorneys em-
17 played by the Secretary of Agriculture may, with the al)-
18 pr'.val of the Attorney General, appear in the Uiiited Sates
19 district court representing the Secretary in any action seek-

20 ing such a temporary restraining order or injunction.'.
21 SEC. 6. Subsection 308 (a) of said Packers and Stock-
22 yards Act (7 U.S.C. 209 (a) ) is amended to read:
23 (a) If any person subject to any of the provisions of
24 this Act violates, with respect to matters relating to live-
25 stock or poultry, any of the provisions of this Act or of any








5
1 order of the Secretary made under this Act, lie shall be
2 liable to the person or persons injured thereby for the full
3 amount of damages sustained in consequence of such viola-
4 tion.".
5 SEC. 7. Section 309 of said Packers and Stockyards Act
6 (7 U.S.C. 210) is amended as follows:
7 (a) By changing the first sentence in subsection (a) to
8 read: "Any person complaining of anything done or omitted

9 to be done, with respect to matters relating to livestock or
10 poultry, by any person subject to this Act (hereinafter in

11 this section referred to as the 'defendant') in V'olation of any
12 of the provisions of this Act or of an order of the Secretary
13 made under this Act, may, at any time within one hundred

1.1 and twenty days after the cause of action accrues, apply
15 to the Secretary by complaint which shall briefly state the
16 facts, whereupon if the Secretary has reasonable grounds
17 for believing that the defendant has violated the Act or an
18 order of the Secretary made under the Act, a copy of the
19 complaint thus made shall be forwarded by the Secretary
20 to the defendant, who shall be called upon to satisfy the
21 complaint, or to answer it in writing, within a reasonable
22 time to be specified by the Secretary.";
23 (b) By substituting a colon for the period at the end
24 of subsection (e) and adding thereafter the following pro-
25 viso: Provided, That in complaints wherein the amount








6

1 claimed as damages does not exceed the sum of $3,000 an.
2 oral hearing need not be held and proof in support of the
3 complaint and in support of the defendant's answer may be
4 supplied in the form of depositions or verified statements of
5 fact unless the Secretary directs that an oral hearing be
6 held."; and
7 (c) By adding at the end of said section the following
8 subsections:

9 "(g) Any party adversely affected by the entry by the
10 Secretary of an order granting or denying reparation may,
11 within thirty days from and after the date of such order, ap-
12 peal therefrom to the district court of the United States for

13 the district in which the hearing was held: Provided, That in
14 cases handled without oral hearing in accordance with sub-
15 section (e) or in which oral hearing has been waived by
16 agreement of the parties, appeal may be to tie-district court

17 of the United States for the district in which any defendant
18 is located. Such appeal shall be perfected by the filing with

19 the clerk of said court of a notice of appeal, together with a
20 petition in duplicate which shall recite the prior proceedings
21 before the Secretary and shall state the grounds upon which

22 appellant relies to defeat the right of any adverse party to
23 recover, or to establish his own right to recover, the damages
24 claimed, with proof of service thereof upon each adverse
25 party. Such an appeal by an appellant who has been ordered








7
1 by the Secretary to pay a reparation award shall not be effec-
2 tive unless, within thirty days from and after the date of the
3 Secretary's order, the appellant also files with the clerk a
4 bond in the amount of 130 per century of the amount of the
5 reparation awarded, conditioned upon the payment of any

6 money judgment entered by the court against the appellant,
7 plus interest and costs, including a reasonable attorney's fee
8 for the appellee, if the appellee shall prevail. Such bond
9 shall be in the form of cash, negotiable securities having a
10 market value at least equivalent to the amount of bond pre-
11 scribed, or the undertaking of a surety company approved
12 by the court. The clerk of the court shall inunediately forward
13 a copy of the petition to the Secretary, who shall forthwith
14 prepare, certify, and file in said court a true copy of the
15 Secretary's decision, findings of fact, conclusions, and order
16 in said case, together with copies of the pleadings upon which
17 the case was heard and submitted to the Secretary. Such suit
18 in the district court shall be a trial de novo and shall proceed

19 in all respects like other civil suits for damages, except that
20 the findings of fact and order or orders of the Secretary shall
21 be prima facie evidence of the facts therein stated. An appel-
22 lee shall not be liable for costs in said court and, if he prevails,
23 he shall be allowed a reasonable attorney's fee to be taxed

24 and collected as a part of his costs.








8
1 "(h) Unless a defendant who is registered under this
2 Act, and against whom an order for the payment of money
3 has been issued, shows to the satisfaction of the Secretary
4 within five days from the expiration of the period allowed

5 for compliance with such order either that he has taken aln
6 appeal as provided for in subsection (g) of this section or

7 that payment has been made in full as required by such order,
8 he shall be suspended automatically as a registrant under the

9 Act at the expiration of such five-day period until he shows to
10 the satisfaction of the Secretary that the amount therein

11 specified has been paid, with interest thereon to date of pay-
12 ment. If an appeal is taken by such defendant and the
13 judgment of the court is adverse to the appellant, or if the

14 appeal is dismissed, unless the defendant within the five days
15 thereafter makes payment as required by the order, he shall
16 be suspended automatically as a registrant until he shows to
17 the satisfaction of the Secretary that payment has been made,
18 with interest thereon to date of payment. If such a judgment

19 is stayed by a court of competent jurisdiction, the suspension
20 shall become effective five days after the expiration of such

21 stay unless full payment has been made, with interest to
22 date of payment, and shall continue until the defendant shows
23 to the satisfaction of the Secretary that he has made such
24 payment, with such interest.





10


9
1 "(i) Unless any other defendant, against whom an
2 order for the payment of money has been issued, shows to
3 the satisfaction of the Secretary within five days from the
4 expiration of the period allowed for compliance with such
5 order either that he has taken an appeal as provided for in

6 subsection (g) of this section or that payment has been
7 made in full as required by such order, such defendant shall

8 be liable to a penalty of $500 per day for each day, after
9 said five days, in which he engages in any business subject
10 to this Act, until such defendant shows to the satisfaction
11 of the Secretary that the amount specified in the order, with

12 interest to date of payment, has been paid, which penalty
13 shall accrue to the United States. If an appeal is taken by
14 such defendant, said penalty shall not begin to accrue until
15 five days after judgment by the court adverse to the defend-
16 ant, or dismissal of the appeal. If such a judgment is stayed
17 by a court of competent jurisdiction, the penalty shall become
18 applicable beginning five days after the expiration of such

19 stay unless full payment has been made, with interest to
20 date of payment, and shall continue to be applicable until
21 such payment, with interest, has been made.".
22 SEC. 8. Said Packers and Stockyards Act is further
23 amended by adding after section 408 (7 U.S.C. 229) a new
24 section 409 to read as follows:








10
1 "SEC. 409. Any delay or attempt to delay by a market

2 agency, dealer, or packer purchasing livestock, the collection
3 of funds through the mails, or otherwise for the purpose of

4 or resulting in extending the normal period of payment for

5 such livestock shall be considered an 'unfair practice' in vio-
6 lation of the Act. Nothing in this section shall be deemed to
7 limit the meaning of the term 'unfair practice' as used in
8 the Act.".

9 SEc. 9. Said Packers and Stockyards Act, 1921, as
10 amended (7 U.S.C. 181, et seq.), is hereby further amended

11 by adding thereto a new section 206, to read as follows:
12 "SEc. 206. (a) It is hereby found that a burden on and

13 obstruction to commerce in livestock is caused by financing
14 arrangements under which packers encumber, give lenders

15 security interest in, or place liens on, livestock purchased
16 by packers in cash sales, or on inventories of or receivables
17 from meat, meat food products, or livestock products there-

18 from, when payment is not made for the livestock and that

19 such arrangements are contrary to the public interest. This
20. section is intended to remedy such burden on and obstruction
21 to commerce in livestock and protect the public interest.
22 "(b) It shall be unlawful for any packer to encumber,
23 give a security interest in, or place a lien on, livestock pur-


chased or to be purchased in cash sales, or on inventories of
25
or on receivables from meat, meat food products, or livestock





12

11

1 products therefrom, except to the extent of the value of such
2 livestock, inventories and receivables in excess of the amount
3 which is owed to unpaid sellers of livestock in cash sales, and
4 any provisions of a contract, agreement or other arrangement

5 entered into by such packer shall be unlawful, and shall be
6 unenforceable by any person, to the extent that it is in vio-
7 lation of this section.
8 "(c) For the purpose of this section, a cash sale means

9 a sale in which the seller does not expressly extend credit
10 to the buyer.".
11 SEC. 10. Said Packers and Stockyards Act is further
12 amended by adding after section 409 (7 U.S.C. 229) a
l3 iiev section 410 to read as follows:
14 "SEC. 410. Debts of a bankrupt that are owing for the
15 purchase of livestock, meats or poultry shall have priority
16 in accordance with clause (5) of subsection a of section

17 64 of the Act of July 1, 1898, entitled 'An Act to estab-
18 lisi a uniform system of bankruptcy throughout the United

19 States' (.)0 Stat. 5603), :is amended (11 U.S.C. 104(a)
20 (5) ), and shall have priority over all other debts and rents
21 i:iiIided within said clause (5) notwithstanding aiiy other
22 provision of law, if, at the time such debts were incurred,
23 tle bankrupt was a packer, market agency, or dealer sub-
24 jecI to this Act.".






13


12
1 SEC. 11. If any provision of this Act or the application
2 thereof to any person or circumstances is held invalid, the
3 validity of the remainder of the Act and the application of
4 such provision to other persons or circumstances shall not be

5 affected thereby. Pending proceedings shall not be abated
6 by reason of any provision of this Act, but shall be disposed
7 of pursuant to the provisions of the Packers and Stockyards
8 Act, 1921, as amended, and the Act of July 12, 1943, in

9 effect immediately prior to the effective date of this Act.


79-314 0 76 2









[COMMITTEE PRINT NO. 2]
FEBRUARY 5, 1976
041i1n CONG RESS
2t SESSION H R .




IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 1976
Mr. ----------introduced the following bill; which was referred to the Con-
mittee on




A BILL
To amend the Packers and Stockyards Act of 1921, as amended,
and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 tires of the United States of America in Congress assembled,
3 That the proviso in the paragraph designated "Packers and
4 Stockyards Act," under the heading "MARKETING

5 SERVICE," in the Act of July 12, 1943 (57 Stat. 422; 7
6 U.S.C. 204), is amended by striking out "market agency
7 and dealer" and inserting in lieu thereof "market agency (as
8 defined in title III of the Act), every packer (as defined in

9 title II of the Act) in connection with it livestock purchas-
10 ing operations, and every other person operating as a dealer.

11 (as defined in title III of the Act) ".








)

1 SEC. 2. Section 201 of said Packers aiid Stockyairds Act

2 (7 U.S.C. 191) is amended to read:

3 "SEC. 201. When used ill this Act the term 'packer'
4 means any person engaged inl the business (a) of buying or

5 otherwise acquiring in commerce livestock for purposes of

6 slaughter, or (b) of manufacturing, processing, or prepalriig

7 in any manner meats or meat food products for sale or ship-
8 meant in commerce, or (c) of buying or otherwise acquiring

9 or selling or otherwise marketing meats, meat food lr4dticts

10 or livestock products in unmanufactured form in commerce,

11 on a commission basis or otherwise, either oi his ownI account
12 or as the employee or agent of the vendor or purchaser:

13 Provided, howerer, That nothing in this section shall affect

14 the jurisdiction of the Federal Trade Commission with

15 respect to retail sales of meat, meat food products, livestock

16 products in unmnanufactured form, or poultry products as

17 provided in sectiomn 406 of this Act.".

18 SEC. 3. Sections 202 and 312 (a) of *aid Packers amid

19 Stockyards Act (7 U.S.C. 192 and 2183 (a) ) are amendcd

20 by deletingy tie phrase "ii1 commerce' wherever it appears

21 in said sectiomis, and by deletinig the commas immediately

22 before and following the phrase "ill comnimerce" ill section,

23 202 (b) and 312 (a) of said Act (7 U.S.C. 192 (b) and

24 213 (a)).





16


3
1 SEc. 4. That the proviso in the paragraph designated

2 "Packers and Stockyards Act" under the heading "MAR-
3 KETING SERVICE" in the Act of July 12, 1943 (57
4 Stat. 422; 7 U.S.C. 204), is further amended by adding at

5 the end thereof a new sentence is follows: "If the Secretary
6 finds any packer is insolvent, lie may after notice and hearing
7 issue an order under the provisions -of section 203 requiring
8 such packer to cease and desist front purchasing livestock or
9 poultry while insolvent, or while insolvent except under such
10 conditions as the Secretiry may prescribe to effectuate the

11 purposes of the Act.".
12 SEC. 5. Said Packers and Stockyards Act is further
13 amended by redesignating section 408 as section 411 and
14 by adding to the Act a new section 408 to read as follows:
15 "SEC. 408. Whenever the Secretary has reason to be-
16 lieve that any11 p, -ronlsubject to this Act. (a) with respect
17 to any transaction subject to the Act, has failed to pay or
18 is liable to ,iv I'mlr li\'estock, meats, ieat food l)rodutcts,

19 or livestock products in unmanufactured form, or has
20 failed to remit to the person entitled thereto the
21 net proC(ed from the sale of any such colmmodity
22 sold on a commission basis; or (b) has operated while
23 insol'et, or otherwise in violation of the Act in a man-
24 ner wbich nay reasoimbly l)e expected to cause irreparal)le








4

1 damage to another person; or (c) does not have the required
2 bond, and that it would be in the public interest to enjoin such
3 person from operating subject to this Act or enjoin him
4 from operating subject to this Act except under such con-
5 ditions as would protect vendors or consignors of such corn-
6 modifies or other affected persons, until complaint under
7 this Act is issued and dismissed by the Secretary or until
8 order to cease and desist made thereon by the Secretary has
9 become final and effective within the meaning of this Act
10 or is set aside on appellate review of the Secretary's order,
11 the Secretary may notify the Attorney General, who may
12 apply to the United States district court for the district in

13 which such person has his principal place of business or in
14 which he resides for a temporary injtuction or restraining
15 order. When needed to effectuate the purposes of this section,
16 the court shall, upon a proper showing, issue a temporary
17 injunction or restraining order, without bond. Attorneys ema-
18 ployed by the Secretary of Agriculture may, with the ap-

19 pro,'al of the Attorney General, appear in the United States
20 district court representing the Secretary in any action seek-
21 ing such a temporary restraining order or injunction.".
22 SEC. 6. Subsection 308 (a) of said Packers and Stock-
23 yards Act (7 U.S.C. 209 (a)) is amended to read:
24 "(a) If any person subject to any of the provisions of

25 iis Act violates aly of the p i' of thi Act m of an





18


5
1 order of the Secretary made under this Act, he shall be

2 liable to the person or persons injured thereby for the full
3 amount of damages sustained in consequence of such viola-
4 tion.".
5 SEC. 7. Said Packers-and Stockyards Act is further

6 amended by adding after section 408 (7 U.S.C. 229) a new
7 section 409 to read as follows:
S "SEC. 409. Each packer, market agency, or dealer pur-
9 chasing livestock shall, before the close of the next business
10 day following the purchase of livestock and transfer of pos-
11 session thereof, transmit or deliver to the seller or his duly
12 authorized agent the full amount of the purchase price,
13 unless otherwise expressly agreed between the parties before
14 the purchase of the livestock. Any such agreement shall be
15 disclosed in the records of any market agency or dealer sell-
16 ing the livestock, and in the purchaser's records and on the
17 accounts or other documents issued by the purchaser iela'ting
18 to the transaction. Any delay or attempt to delay by a market

19 agency, Uealer, or packer purchasing livestock, the collection
20 of funds through the mails, or otherwise for the purpose of
21 or resulting in extending the normal period of payment foi
22 such livestock shall be considered an 'unfair practice' in vio
23 lation of the Act. Nothing in this section shall be deemed to
24 limit the meaning of the term 'unfair practice' as used in
25 the Act.".








6
1 SEc. 8. Said Packers and Stockyards Act, 1921, as
2 amended (7 U.S.C. 181, et seq.), is hereby further amended
3 by adding thereto after section 205 (7 U.S.C. 195) a
4 new section 206, to read as follows:
[Option No. 1]
5 "SEC. 206. (a) It is hereby found that a burden on and
6 obstruction to commerce in livestock is caused by financing
7 arrangements under which packers encumber, give lenders
8 security interest in, or place liens on, livestock purchased
9 by packers in cash sales, or on inventories of or receivables
10 from meat, meat food products, or livestock products there-
11 from, when payment is not made for the livestock and flat
12 sueh arrangements are contrary to the public interest. This

13 section is intended to remedy such burden on and obstruction
14 to commerce in livestock and protect the public interest.

15 "(b) It shall be unlawful for any packer to encumber,
16 give a security interest in, or place-a lien on, livestock pur-
17 chased or to be purchased in cash sales, or on inventories of
18 or wn receivables from meat, meat food products, or livestock

19 products therefrom, except to the extent of the value of such
20 livestock, inventories and receivables in excess of the amount
21 which is owed to unpaid sellers of livestock in cash sales, and
22 any provisions of a contract, agreement or other arrangement
23 entered into by such packer shall be unlawful, and shall be
24 unenforceable by any person, to the extent that it is in viola-
25 tion of this section.





20


7
1 "(c) For the purpose of this section, a cash sale-means
2 a sale in which the seller does not expressly extend credit to
4
3 the "bu3er."7

[Option No. 2]
4 "SEC. 206. (a) It is hereby found that it is a burden on
5 and obstruction to conunerce contrary to the public interest
6 when livestock sold to packers in cash sales are transferred to
7 such packers and upon such transfer the livestock, meat and
S meat product inventories, proceeds and receivables therefrom
9 may immediately become collateral for other creditors of the
10 packer leaving the livestock seller in an unsecured position
11 until payinent for his livestock is actually received.
12 "(b) There is hereby created a statutory lien for each
13 seller of livestock to a packer in a cash sale. Such lien shall
14 be applicable to the livestock of such seller and also to all
15 inventories of, and receivables and proceeds from, meat and
16 meat food products and livestock products in the possession
17 of or belonging or owed to such packer, which were derived
18 from all livestock slaughtered by or on behalf of such packer.
19 The lien of each such seller shall be limited to the amount
20 owed him in such cash sale and all such liens shall be applied
21 pro rata with respect to such inventories, receivables and
22 proceeds. Such statutory Hens shall be considered perfected
23 as of the date and time of transfer of possession of the live-
24 stock of the respective sellers to the packer or his representa-





21


8
:1 tive, and shall have priority over any or all liens created by

2 any person other than the seller of the livestock, including
3 liens for taxes and other liens created by operation of law,
4 notwithstanding any other provision of law.
5 "(c) For the purpose of this section, a cash sale means

6 a sale in which the seller does not expressly extend credit to
7 the buyer.
[Option No. 3]
8 "SEC. 206. (a) It is hereby found that a burden on and
9 obstruction to commerce in livestock is caused by financing

10 arrangements under which packers encumber, give lenders
11 security interest in, or place liens on, livestock purchased

12 by packers in cash sales, or on inventories of or receivables
13 from meat, meat food products, or livestock products there-
14 rorn, when payment is not made for the livestock and that
15 such arrangements are contrary to the public interest. This
16 section is 'intended to remedy such burden on and obstruc-
17 tion to commerce in livestock and protect the public interest.
18 ()' All livestock purchased by a packer in cash sales

19 and all inventories of, or receivables from, meat, meat food
20 products, or' livestock products derived therefrom shall be
21 held by such packer in trust for the benefit of the sellers of
22 such livestock until full payment for such livestock has been
23 received by such sellers.".
24 SEC. 9. Said Packers and. Stockyards Act is further





22


9
1 ainended by adding after new section 409a new section 410

2 to read as follows:
3 "Src. 410. No requirement of a State or territory of tile

4 United States or any subdivision thereof with respect to

5 bonding of packers or prompt payment by packers., for

6 -livestock purchases may be enforced by any State or tern-
7 tory of the United States or any instrumentality or sub-

8 division thereof upon any packer operating in compliance

9 with the bonding provisions under the Act of July 12, 1943

10 (57 Stat. 422; 7 U.S.C. 204), and prompt payment provi-
11 sions of section 409 of this Act.".
12 SEC. 10. The Secretary of Agriculture is hereby author-

13 ized and directed to conduct for a period of two years, from

14 and after a date ninety days after enactment of ths provi-

15 sion, a study of the acquisition, by purchase or otherwise, of
16 meat, meat food products, or livestock products in unmanu-

17 factured form 1)y packers as defined in subsections 201 (b)

18 zind (c) of the Packers and Stockyards Act, 1921, a s

19 alnended. Such study shall include the methods of acquisitions
20 and the maner and timing of payment by such packers for

21 such ineats, meat food loducts, or livestock products in
22 unninufacttired form. The Secretary shall monitor inl such
23 fashion as lie deeins appropriate, for each such packer the

24 clal scd line lcvt wec fi acquisition of such nica ts, meat food

60l5r(1dit's. or livestock products" and paymunent therefor. For








10

1 purposes of such study, the Secretary shall have and may
2 exercise any and all powers conferred upon him by the
3 Packers and Stockyards Act, 1921, as amended. Within

4 thirty days after completion of the first year of such study,
5 the Secretary shall present to the Committees on Agriculture

6 of the Senate and House of Representatives an interint
7 report of the results of the study. Within sixty days after

8 completion of the second year of such study, the Secretary
9 shall deliver to said committees a final report of the results
10 of the study together with recommendations, if any, for
11 legislation which the Secretary deems necessary to deal

12 effectively with any matters or problems revealed by the
13 study. There is hereby authorized to 1)e appropriated a sum
14 of not to exceed $ to conduct such study.
15 SEC. 11. If any provision of this Act or the application
16 thereof to any person or circumstances is held invalid, the
17 validity of the remainder of the Act and the application of

18 such provision to other pel,, or circumstances shall not be

19 affected thereby. Pendifig proceedings shall not be abated

20 by reason of any provision of this Act, but shall be disposed
21 of pursuant to the provisions of the Packers and Stockyzards
9 Act, 1921, as anended, and the Act of July 12, 1948, in
23 effect immediately prior to the effective date of this Act.





24

Mr. POAGE. I thought that we had better proceed as far as we could
here today. We want to see what items we have agreement on and
what items we do not have agreement on.
We will start out with the first section. This first paragraph con-
tains the wording:
Amended by striking out "market agency and dealer" and inserting in lieu
thereof "market agency (as defined in title III of the act), every packer (as
defined in title II of the act in connection with its livestock purchasing opera-
tions, and every other person operating as a dealer (as defined in title III of
the act."
I wonder if we need an understanding as to just what that is.
Will the staff give us a response?
Mr. BOR. Mr. Chairman, this is the provision in the committee
print which provides for packer bonding.
As the act now is worded, it provides that the Secretary can require
reasonable bonds from every market agency and dealer.
What the section does is to expand the -bonding requirements so it
would apply merely to market agencies and dealers 'but also to packers
as are defined on page 2 of the committee print.
Mr. THONE. Mr. Chairman, may I ask counsel a question?
Mr. POAGE. Certainly.
Mr. THONE. Would you give me the exact cross-reference to the
Packers and Stockyards Act on this? I studied it at home earlier this
morning. I did not find a direct cross-reference to the act itself.
Mr. BOR. If you have a little compilation which is put out by the
Department of Agriculture, the amended section appears on page 8.
Mr. THONE. Page 8?
Mr. BOR. Yes. You will notice in the middle of the page there is a
provision which says "An Act of Congress approved July 12, 1943."
Mr. THONE. That's the appropriation rider, is it not?
Mr. BoR. That's right. That. is a, rider which does not appear as
part of the Packers and Stockyards Act itself, but is separate legisla-
tion. It established bonding requirements which apply to market
agencies and dealers.
What we have one in the committee print is to expand on the
coverage of that section so that it would apply as well to packers.
Mr. THON-E. And there's no question, Mr. Counsel, in your mind,
that even though that was a rider on the legislation of the appropria-
tion bill, so to speak, there's any question about its effectiveness?
Mr. BoR. That's right, sir. It's fully effective, as much so as the
Packers and Stockyards Act.
Mr. THONE. Fine. As you know, this Committee Print No. 2 is taken
from H.R. 8410 which I introduced some time ago. I notice it is
identical to our section, is it not?
Mr. BAIZE. Yes.
Mr. THONE. Thank you.
Mr. POAGE. Do we understand just what this means?
This includes every packer as defined in title II.
Who are those defined in title II as distinguished from other
packers? What limitation is there?
Mr. BoR. The definition would include persons who acquire live-
stock and slaughter the livestock. It would include a person who
processes livestock into meat and meat products. It also includes
jobbers, wholesalers, distributors, and brokers and retailers. That's





25


the way the definition is worded but on page 1 the bonding require-
ment is applied only to a packer in connection with his livestock
purchasing operations, so it would not apply to packers who are
engaged in other types of operations but merely to those packers who
were involved in livestock purchasing operations.
Mr. POAGE. I am not sure that I understand.
Do you mean by this that you are including the few who are left,
like the country slaughterhouses which kill a yearling once a week
and that sort of thing? Are they included?
Mr. BOR. As long as they fall within the coverage of the act-
Mr. POAGE. Are they covered by the act?
Mr. BoR. I mean those involved with operations which affect inter-
state commerce.
Mr. POAGE. Obviously, those kinds of packers are not involved
in interstate commerce unless they live in Texarkana, Tex., or some
similar location.
I am just trying to find out where we stand.
Mr. BAIZE. It is not in the intent that those be covered. It is those
who are in interstate commerce who are actually buying cattle for
resale in interstate commerce. That is the intent in this legislation.
Mr. POAGE. That may be the intent but is it the law?
We want to know that this does what we intend.
Mr. BoR. The definition of the term "packer" is worded in such a
way as to only involve persons engaged in the business of buying or
processing meats for sale or shipment in commerce-
Mr. POAGE. Then what you are telling us is that this does not
apply-
Mr. BoR. It does not apply to the kind of person that you describe.
Mr. POAGE. That's what we want to know.
Mr. FINDLEY. Does the quote "in commerce" translate into "inter-
state commerce" ? Is it one and the same term?
Mr. BOR. Yes. You'll notice the term "commerce" is defined on page
2 of the packers and stockyards compilation.
Mr. FINDLEY. Yes.
Mr. SEBELITUS. I am very much interested in this definition of the
word "packer" as one buying or otherwise acquiring commerce live-
stock for the purpose of slaughter. We just brought an action out in
Kansas where a feedlot and the Kansas Livestock Association with
amicus curiae by the Texas cattle feeders and others where the
Federal District Court in Wichita, Kans., ruled that feedlots don't
have to be bound by falling under certain categories that Marvin
McLain wants them to over in the Packers and Stockyards Act, but
reading the language of this definition of "packer," any bureaucrat
can just about make anybody that touched a cow would be a "packer"
because again we'd have to define words which have been used in the
definition. More on No. 3 "buying or otherwise acquiring or selling
or marketing meats, meat food products or livestock products in un-
manufactured form."
Is a live steer a livestock product in unmanufactured form?
Mr. BOR. The part that applies to the bonding provision is a packer
in connection with his livestock purchasing operations. It would not
affect the other type of packers who are defined in the act.





26


Subsection 201 (a) is worded the same as it currently appears in
the Packers and Stockyards Act. That section was not changed.
Mr. SEBELIUS. I would hope that we would have language in there
that would definitely say that the commercial feedlots, which are only
handling livestock, are not actually packers. They are only handling
other people's stock. They should definitely be excluded from what
we are trying to accomplish.
Mr. IMHOF. We could certainly accommodate that in the report, Mr.
Sebelius. I think the case that you have reference to is the so-called
Solomon Valley case, and that involves the efforts by the Packers
and Stockyards Administration to register these feedlots as dealers.
Mr. SEBELIUS. That's definitely it. But it's another fringe thing. I
don't want that to come climbing out of here to haunt me next
November.
Mr. IMHOF. It would not be covered, sir, but we will make sure
that the report clearly indicates that.
Mr. MELCHER. Mr. Chairman, I am referring to section 201 (b) on
line 6 on page 2.
This would make a local locker plant subject to the act. If the local
locker plant sold hamburger to a restaurant under the terms-that is,
under the interpretation of "commerce," even a small hamburger shop,
if I'm not mistaken, has been blanketed under "commerce" in terms of
selling meat. I
Mr. IMHOF. If the locker plant purchased the meat that it used to
fabricate that product in commerce it would be subject under the pres-
ent statute.
Mr. MELCHER. You mean subject to the Packers and Stockyards
Act?
Mr. IMHOF. Yes, sir.
Mr. MELcHEi. Does this definition in 201 add to the existing scope
of the act ?
Mr. IMHOF. Yes, sir, it would. It would not in 201 (b) I don't be-
lieve, but if you have reference to 201 (c), which I think is in line 8
of page 2 of the Committee Print No. 2, it would bring under the
scope of the Packers and Stockyards Act as packers, purveyors,
brokers, and certain other entities which heretofore have not been
covered by the Packers and Stockyards Act.
Mr. MELCHER. What has the Packers and Stockyards Act meant to
my locker plant?
Mr. IMHOF. Heretofore if your locker plant purchased the meat used
in commerce or sold the product made in commerce it is subject to the
act as a packer.
Mr. MELCHER. And what did that mean?
Mr. IMHOF. That meant that it was subject to section 202 of the act,
it could not commit unfair practices in commerce. There's a litany
of-
Mr. MELCHER. Who read them the litany, and how often did they
read it to them? Who checked it?
Mr. ImHOF. The Packers and Stockyards Administration checked
them, sir. We have with us today a representative of the Administra-
tion, and he might be able to enlighten us as to how many cases were
brought against packers in a given period of time.





27


Mr. MELCHER. I just wondered what they had to do. Did they have
to have a letter every year or did somebody actually come out there
and look at their books or did they fill out some forms or what did
they have to do?
Mr. IMHOF. Perhaps if I could ask Mr. Glenn Bierman, who is as-
sociate administrator of the Packers and Stockyards Administration
to give you a capsule summary of that, sir, Might be the best way to
do it.
Mr. MELCHER. It would be helpful to me.
Mr. BIERMAN. With the small plants, there's really nothing that
they have to do other than conduct their business in an honest and fair
manner. We do not require reports of small plants. We will entertain
complaints.
Mr. MELCHER. It's a question of this: If you did have a complaint
you would follow it up but you are not asking them to fill out any
forms annually or quarterly or anything like that?
Mr. BIERMAN. That's correct, sir.
Mr. MELCHER. Is there anything in here that would ask them to
do more than they are doing right now, filling out papers and comply-
ing with this?
Mr. BiERMAN. Nothing that I have seen.
Mr. MELCHER. Thank you.
Mr. POAGE. We are understanding, I take it, that we are not adding
to the burdens of the intrastate operators; am I correct on that?
Mr. BOR. Yes, sir.
Mr. MELCHER. Mr. Chairman, I think it is more correct to say that
they are all interstate because you couldn't do anything without being
subject to the commerce clause as interpreted in sales and meat. Isn't
that correct?
. Mr. IMHOF. Well, I think a plant that generates any type of volume
will ultimately either purchase across a State line, sir, but
Mr. MELCHER. No. If they sell to a hamburger shop, that has been
interpreted as being in commerce.
Mr. IMHOF. If it's across a State line, yes.
Mr. MELCHER. I mean within the State. I want this clear.
There are people who are traveling who stop at the hamburger
stops. The sale is within the State. It's within the same town. But
because the people that stop in at the hamburger shop are traveling, it
has been ruled as "in commerce" and then subject to it.
Mr. IMHOF. There have been cases under the Civil Rights Act and
perhaps in a few other connections in which such an extreme extension
of the commerce clause has been effected. I am not aware of any case
under this statute where anything quite that extreme has been effected.
Mr. MELCHER. Under the Packers and Stockyards Act.
Mr. IMHOF. Under the Packers and Stockyards Act, yes.
Mr. MELCHER. I am referring to the Wholesome Meat Act.
Mr. IMHOF. I don't believe even the Wholesome Meat Act has ex-
tended that far.
As you know, if a State's laws are at least not equal to those of the
Federal statute, the State can be designated by the Secretary but it
would not be an interpretation of extension of the commerce clause.





28


Certainly that has not yet happened in this act, sir, and I don't
believe the Administration has any intention of trying to stretch this
act that far.
Mr. MELCHER. Packers and Stockyards Act?
Mr. IHoF. Yes.
Mr. POAGE. Let us get this next segment.
The language as provided, however, that nothing in this section
shall affect the jurisdiction of the Federal Trade Commission with
respect to retail sales and meat or poultry products as provided in
section 406 of this act.
Do we understand that this clearly exempts poultry processing?
This definition of packers does not, as I see it, include poultry
processing.
Mr. IMHOF. That is correct.
Mr. POAGE. Are there any other questions?
[No response.]
We will then go to section 3 at the bottom of page 2.
Sections 202 and 312(a) of said Packers and Stockyards Act (7 U.S.C. 192
and 213(a) are amended by deleting the phrase "in commerce" wherever it
appears in said sections, and by deleting the commas immediately before and
following the phrase "in commerce" in sections 202(b) and 312(a) of said Act
(7 U.S.C. 192 (b) and 213 (a)).
What is the purpose of that?
That would read that it was an attempt to do what the ouse
endeavored to do yesterday in the Smith bill on gas and apply Federal
control to intrastate actions.
Mr. BOR. Mr. Chairman, this is just a technical change. There wasn't
any need for the reference to the term "in commerce" in those sub-
sections because the definition of the term "packer" was changed to
include the words "in commerce" in each of the categories that appear
there. So it was felt that since it was already explicit in the definition
of the term "packer" it was not needed in those two subsections.
Mr. POAGE. What harm did it do?
Mr. IM1HOF. In the course of administratively enforcing the statute,
the present statute requires not only that the packer be a packer who
operates in commerce but also that the individual transaction which
is charged to be a violation of the statute also occurred in commerce.
The change which would be affected by this bill would require or
continue the requirement that the packer be a packer who operates in
interstate commerce, but it would eliminate the requirement that each
and every transaction charged as a violation was an interstate transac-
tion. So this would reach intrastate transactions which were unfair
or otherwise in violation of the statute by an interstate packer.
Mr. POAGE. I think that is a fair explanation and I think the ma-
jority is strongly in favor of that. I just want to point out that my
own feeling is that we ought not to sit here and simply try to set
ourselves up as the judge and the jury of everything that takes place
within the State of Texas or the State of New York or any other
State.
I never believed that we really had the authority to handle every
transaction within the State. It may be that unless we do we can'
achieve anything with this kind of a bill. Because if Mr. Meleher
sells a bunch of cattle to a packinghouse in Montana, the transaction





29


takes place in Montana and it is not an "in commerce" sale. But if they
don't pay him, we are trying to say that they've got to pay him.
I had based my reasoning that we had a right to require this be-
cause we licensed that packer to do business and we could require that
packer who was subject to Federal license, we could control the way
in which he does business. We can't control the transactions within
the State other than to the extent that we can control the actions of
that packer.
We can't control Mr. Melcher's actions in selling to them, but we
could control the way -in which -that packer does business. Don't we
have a right to do that?
Mr. MHOF. That is exactly correct.
Mr. FINDLEY. We have the right under the present law?
Mr. POAGE. Yes; we have the right.
Mr. IMHOF. But not as to intrastate action. That is the purpose of
this bill.
Mr. POAGE. Wait. The purpose of this bill is to prevent him from
failing to pay. We do control that packer in a great many respects
right now under the Packers and Stockyards Act and we control the
way in which he conducts his business within the State.
We do it because he is in commerce and before we give him a license
to engage in interstate commerce we make him submit to these rules.
Mr. IMHOF. Sir, I believe that you have just stated very precisely
the purpose of this bill.
But under the statute, as it presently exists, unless the packer is in
commerce and the transaction in question is in commerce, the admin-
istration cannot move against him. The purpose of this bill is to make
sure that the very practices that the chairman has just described can
be reached by the administration if they are committed by a packer
who is an interstate or an in commerce packer.
Mr. POAGE. We've extended this Packers and Stockyards Act to
where it covers a lot of these auction rings, haven't we?
Mr. IMHOF. Yes.
Mr. POAGE. Most of the actions which take place in the auction ring
are purely intrastate commerce.
Mr. IMIHOF. Yes, sir; that is correct.
Mr. POAGE. I said that most of the actions that take place in the
Abilene auction, for instance, are intrastate transactions. The cattle
were grown there; they've never been out of Abilene and the man
sells them to somebody in the State; he is paid in the State; they are
probably slaughtered in the State; but ait the time that the transaction
takes place at the auction it is purely an instrastate transaction. But we
control it.
Mr. IMHOF. If -the Abilene auction is a posted stockyard
Mr. POAGE. I beg your pardon?
Mr. ImHoF. I'm not personally familiar with the Abilene auction,
but if it is a posted stockyard
Mr. POAGE. Well, of course Abilene is. But as you know, all of the
larger ones are.
Mr. IMIHOF. Yes, sir. If it is a posted stockyard, even though the
action takes place between two Texans and the cattle, in fact, do not
leave -the State of Texas, it is deemed to be in commerce by virtue
79-314-76 3





30


of the statute against the Wallace case earlier in the administration
of the act.
Mr. POAGE. And we do that not because it's interstate commerce but
we do it because we have the right to license this auction ring.
Mr. IMHOF. Yes, sir.
Mr. POAGE. I thought that we claimed the Jurisdiction over these
packers on the same basis. I thought that we claimed the jurisdiction
of the packers not because every transaction was in commerce.
The Chair wants to observe at this moment that a quorum has been
established.
Maybe I am splitting hairs but I feel a great deal more omfortable
in predicating this jurisdiction on our authority to license these pack-
ers than I do upon trying to control intrastate transactions.
Mr. ITi-OF. Yes, sir. I think you have described precisely the thrust
of this bill. That is exactly what the objective of this bill is intended'
to achieve.
Mr. POAGE. That's why I am asking why do we want to take out
these words in commerce?
Mr. hLHiio. Under the present act, the administration can only go
after the interstate transactions of an interstate packer, and yet the
interstate packer could commit any number of intrastate violations
including the ones you listed.
He could escape scot-free under the present statute. This bill would
cure that problem.
Mr. THONE. As a matter of fact the administration has had sub-
stantial problems directly in this area, has it not, Mr. Bierman?
Mr. BIERMAN. We have had a number of complaints come in from
farmers with respect to purchases by packers or dealers who are
interstate. The farmer may know that the dealer is registered, but if'
the dealer, even though he is registered, decides to resell that live-
stock locally within the State and not through a market, then it may
become an intrastate transaction and can raise problems with respect
to jurisdiction.
In some of these cases. the transaction would not be subject.
The same thing can happen with packers who have an intrastate.
plant as well as an interstate plant. In that case we would turn the
complaint over to the. State after we had checked it out and found'
we did not have jurisdiction. That may take several months.
Mr. FINDLEY. Mr. Chairman, this leaves the impression that such
violations would go scot-free.
Such violations would ordinarily be subject to action at the State
level, would they not?
Mr. BIERMAN. They would be subject to whatever State laws would
be applicable, yes.
Mr. FINDLEY. The question in my mind is whether a case has been,
established by the change in the law. I am not aware of it in Illinois,
for example. I have not heard such complaints. In the absence of a
case in support of a change in the law. I would be inclined to leave
the law as it is.
Mr. HITCTTOWER. If I understand the discussion, if we do not change
the law and do not take out the words in commerce. thn if we hnd
a purchase buying for Swift in Amarillo, Tex., which is interstate-








commerce, but he bought the cattle in one county in Texas and was
transported to another county in Texas for slaughter and then resold
to a supermarket in Amarillo-that would be intrastate and would
not be subject to the provisions.
I think that's what we want to do away with because there they -re
in interstate commerce and we want them to pay promptly for that
cattle. So I think that we do need to delete. these words here, in com-
merce, because they are covered by the Packers and Stockyards Act
and we want to be sure that that in-Texas transaction is going to be
covered by requiring the prompt payment.
Mr. FINDLEY. If a case can be made for coverage of a transaction
like that, then it seems to me it can be made for any transaction. Why
don't we just make this Packers and Stockyards Act a national com-
prehensive program and apply it to every transaction?
Mr. HIGHTOWER. Because a lot of these small packers who have
Mr. FINDLEY. Why not?
Mr. HIGHTOWER. I am talking about the situation that Chairman
Poage referred to where they brought in a yearling-a locker plant
type operation killed one-and a situation might exist there where
the plant would get part of the meat as a result for its services, and
then resell that to some local grocer or hamburger shop.
.We are not trying to get that. We. are trying to get these packers
who go out and buy a large number and bring them in. When my
cattleman in Potter County sells to Swift he thinks he is deaiing in
interstate commerce-whether that beef is going to be sold in inter-
state commerce or not.
Swift being a national company, then lie knows it is going to be
covered by the Packers and Stockyards Act, so lie is relying on the
sale of them. That is the kind of transaction that we are talking about.
One of the things that has prompted this legislation is this-our
experience with American Beef-American Beef was a big outfit.
Everybody in that area was so proud to have them because they were
going to be killing hundreds of cattle a day, yet they went broke and
a lot of people got caught holding the sack.
That is what has prompted this legislation. If we are not going to
have an effective provision for prompt payment, then we don't need
the legislation at all. Unless I have completely misunderstood what
our staff has said here, we do need to take these two words out because
we are still going to be dealing with companies that are covered by
the Packers and Stockyards Act, but we do not want to have to impose
the additional test-did all that beef bought from Farmer Jones, was
it resold in interstate commerce or did it go downtown Amarillo?
Mr. ENGLISH. I think, too, that there is a question of consistency.
If you have a plant in interstate commerce, they will have one set of
operations with regard to meat that is sold over a State line, and
another set of rules for meat that is bought and sold within the same
State. I think this creates a very inconsistent pattern.
This also raises a question regarding the assurance people will have
locally. The guy who comes and sells the cattle will have to ask, "Where
are you .going to sell my beef?."
"Is it going to be ,sold in Amarillo or Oklahoma? If it's going to be
sold in Oklahoma I won't let -ou have the cattle."






32


The question we have to resolve then is that of inconsistency. You
get into the small plants that are obviously going to be sold within the
State you are in an entirely different ball game.
Mr. POAGE. But there has to be some basis on which the Congress
can impose Federal control. It's either got to be in interstate commerce
or the rule must be somewhat different from what counsel described.
I think that it is-I don't set myself up as knowing-but, for instance,
the Texas Power & Light Co. will not accept power generated on
your side of Texoma Lake. The reason they won't do it is that they do
not want to get into interstate commerce.
They won't sell power into Oklahoma or to anybody who does sell
power in Oklahoma. There are some coops on Jack Hightower's side
of the river which are also on your side of the river, Mr. English.
The Texas power companies will not sell that power because they
do not want to get into the situation of being engaged in interstate
commerce. In Waco it would be intrastate, but they feel that if they
do any interstate business, their whole business can be and will be-and
I think they are right-controlled by the Federal Government.
Mr. ENGLISH. I believe that's exactly the point. That's a consistency
we would be following.
Mr. POAGE. What I am trying to say is this: That should be our
basis following this rather than trying to declare these transactions
at Abilene are interstate transactions. They, are not interstate trans-
actions but they are transactions with somebody doing an interstate
business and therefore, we can prescribe the rules under which that
individual does an interstate business. It seems to me it makes some
difference and makes it easier for me to take this as one who believes
we ought to maintain some States rights.
Mr. EN-GLISh. It maintains a wholly consistent position with the
way the law is now in the situation you are talking about.
We are dealing here with an operator selling interstate.
31". POAGE. That's right. W~e can impose regulations on him as to
how lie deals.
Mr. ENGLISH. Correct.
Mr. HIGHITOWER. That's what we are doing here. We're removing
that second test. The first test, he's already in interstate commerce
and is already covered by the Packers and Stockyards Act, but this
removes the second test whether this man who is in interstate com-
merce actually does an act down here which is improper.
Mr. POAGE. And you may well be right in saying that that ought
to be removed, but it makes me feel better to know that we are impos-
ing these regulations because Wilson and Co. is engaged in interstate
commerce, and we are prescribing a way Wilson and Co. shall operate
rather than saying that Wilson and Co., if they go out to buy cattle
from Jack Hightower. that we have a right to control that transac-
tion. I don't think that we have any right to control that transaction
except the license that we grant to Wilson and Co. We can make it
contingent upon how they treat Jack Hightower as well as how they
treat the man from New Mexico.
I guess maybe we're splitting hairs but I like to have some defense
that I simply didn't wipe out State rights. I think that Mr. Hightower
makes a perfectly valid point, that we had better leave this language
in there.





33


Does anybody feel that we had better take it out?
OK, then, we will leave it. I guess that takes us up to section 4.
Will you proceed?
Mr. IMHOF. Section 4 provides that:
If the Secretary finds any packer is insolvent, he may after notice and
hearing issue an order under the provisions of section 203 requiring such packer
to cease and desist from purchasing livestock or poultry while insolvent, or
while insolvent except under such conditions as the Secretary may prescribe
to effectuate the purposes of the Act.
The committee will notice that in lines 8 and 9 the words "or poultry"
have been left in here. That is an oversight and unless the chairman
wishes to extend the act to cover poultry we should delete "or poultry"
in lines 8 and 9.
Mr. POAGE. Is there any objection?
The Chair hears none. It is so ordered.
Mr. BEDELL. I should tell you, Mr. Chairman, that I had one of the
poultry people check with me. It was, in our area at least, the problem
of many who raise poultry is really identical with that one of those
who raise cattle in that they do raise them, they do sell them in sub-
stantial quantities to the packers.
I know the testimony we have before us indicated that the poultry
was owned by the producer. At least this person felt pretty strongly
that in the cases wherein the poultry was owned by a feeder then they
felt they should have protection similar to that offered the marketer
of cattle.
Mr. POAGE. Poultry is owned by the producer oftentimes but is it
not all under contract with the processor? You had a lot of people
who grew chickens and turkeys. They sold them to processors.
As far as I know there is not any of that left. I don't know anybody
who buys that way in our country at the present time.
Either the processor himself owns the production plant or if it's a
farmer, he owns the plant and he owns the chickens or turkeys, but
he has contracted with the company that hatched the chicks and
delivered him the baby chicks, and he has contracted with them to
take them at a certain time. So there is not any real ownership, as
I see it.
Mr. BEDELL. Would it be agreeable to the Chairman for me to check
this further? If I find out that there is a significant number of cases,
then I will come back to the committee.
Mr. POAGE. Yes; I think that should be done.
We will then tentatively strike out "or poultry" giving Mr. Bedell
the opportunity to report again to the committee.
IIr. THORNTON. In that regard were there similar changes made
earlier in the act so that it did not affect poultry people? I apologize
for coming in late.
Mr. THONE. That is correct. Poultry is exempted?
Mr. POAGE. Yes, poultry is exempted.
Mr. THORNTON. Thank you.
Mr. POAGE. There is nothing to this section except to confer the
authority to the Secretary?
Mr. IMHOF. That's correct.
Section 5 of the bill complements section 4. Section 4 provides that
the Secretary can issue a cease and desist order while insolvent and





34


section 5 provides that the "Secretary, if he has reason to believe that
any person subject to this act, (a) with respect to any transaction
subject to the act, has failed to pay or is unable to pay for livestock,
meats, meat food products, or livestock products in unmanufactured
form. or has failed to rent to the person entitled thereto the next
proceeds from the sale of any such commodity sold on a commission
basis; or (b) has operated while insolvent, or otherwise in violation
of the act in a manner which may reasonably be expected to cause
irreparable damage to another person;" the Secretary can go to court
and seek a temporary restraining order against further operation by
that packer except under such terms as the court imposes for the pro-
tection of people dealing with that packer until the Secretary is able
to complete the administrative proceeding initiated under section 4
of this bill.
Mr. POAGE. Now this does not actually provide for the bond but
grants the authority to the Secretary to seek injunctive relations if
whatever the bill provides in regard to that bond is not carried out.
Isn't that right? This doesn't grant the authority for a bond.
Mr. IMHOF. That is correct.
Mr. POAGE. So that the question of bonding is yet to come up. This
doesn't make our decision as to whether we are improving bonding
or not, but it says that if we do approve it the Secretary can enforce it.
Mr. THoNE. Mr. Chairman, I feel very strongly that this is an im-
port ant, necessary section to the legislation.
Mr. PoAGE. I agree.
Mr. THONE. One question: Counsel, can you answer this? I talked
to staff counsel before on this. Does this injunction authority allow ex
parte ?
Mr. IMIOF. I don't believe the bill has the thrust of changing the
present law on that, Mr. Thone.
Mr. THoN& Where is the present law in the act regarding injunc-
tions? I didn't think they had the authority.
Mr. ImIoF. The present law is you can seek contemporary restrain-
ing order ex parte but it is limited to a maximum, I believe, of 10
days. Perhaps one of the committee members could confirm that,
within which time there must be notice to the opposing party for an
opportunity to appear.
Mr. THoNE. Lt's be sure of that. We had that wrangle. as you
know, with the Commodity Futures Trading Act, and there is an
excellent provision in there. I know that the Chairman also feels very
strongly on this and I certainly do, that the parties have a chance
to come in before the court.
Mr. IUToF. I believe that is guaranteed, sir, but we will certainly
accommodate that in the report.
Mr. THoN-E. Fine. Thank you.
Mr. POAGE. Let's go to Section 6.
Mr. ImHOF. Section 6 of the bill, sir, provides that if any person
subject to any of the provisions of the act violates any of those pro-
visions or indeed violates any order of the Secretary made under this
act. he shall be liable to the person or persons injured thereby for the
full amount of damages sustained in consequence of such vn.
Mr. POAGE. That's common law anyhow.





35


Mr. BoR. Mr. Chairman, there are some substantive changes that
are being made by this provision.
At the present time this provision applies to stockyard owners,
market agencies and dealers. It does not apply to packers.
The effect of the inclusion of the provision is to say that if you
*have a packer which has been in violation of section 202 of the act,
for example, a packer that engaged in an unfair or a discriminatory
practice or otherwise violated section 202 and has caused injury or
-damages to another person, that person now would have the oppor-
tunity to go to Federal District Court and obtain recovery of damages
which have been incurred as a result.
There is one technical change that we would like to make to this
-section, and that is to exclude "poultry" from the section and so it is
our suggestion that this would read:
"If any person subject to the provisions other than title V of the
act"-'if we add the words "other than title V of the act"-that would
mean that poultry would not be covered by this particular provision.
But anybody who falls within the definition of the term "packer"
would be covered, and as a result, anyone who is injured by unfair
practices by packers would be able to resort to the courts for recovery
-of damages.
Mr. POAGE. Well, as to this poultry provision, I agree we would
want to eliminate "poultry" from the provisions of this act but "poul-
try'" is covered by section 5 of the existing law. Isn't that correct?
Mr. BoR. That's correct.
Mr. POAGE. If there are any damages by a violation of what is now
imposed upon poultry, aren't we just taking that out of the law if it's
already in the law? Aren't we just taking it out?
Mr. BOR. Section 308 (a) as it is now worded doesn't refer at all to
poultry. It only deals with market agencies, stockyards, and dealers.
Mr. TIONE. May I interrupt here?
Mr. PAGE. Yes.
Mr. THONE. I'm sorry. I'm not feeling very well today. I got out
of a sick bed to come down here because I feel so strongly on this.
I am a little muddled.
I read this section earlier this morning. How does this section change
the current 308? I know what you just addressed yourself to, Mr.
Bor-stockyards, market agencies, or dealers-now we put "person"
in here and now we're taking out "poultry", how does this change
the existing law and why is it necessary at all in here?
Mr. BOR. What change is effected is that under 308 (a) as it is cur-
rently worded, it does not apply to packers as it's defined under the
act. The effect of the change is to bring "packers" under section 308 (a).
Mr. THONE. You're absolutely right.
Mr. POAGE. Does anybody find any objections?
[No response.]
Mr. POAGE. We move now to section 7.
Mr. ImHoF. Moving to section 7, Mr. Chairman, would add to the
statute a new section 409. Section 409 has two parts, essentially.
The first part provides that:
Each packer, market agency, or dealer purchasing livestock shall, before the
close of the next business day following the purchase of livestock and transfer





36


of possession thereof, transmit or deliver to the seller or his duly authorized
agent the full amount of the purchase price, unless otherwise expressly agreed
between the parties before the purchase of the livestock.
Mr. POAGE. Right there I want to stop because I think that is one of
the important parts here.
We, of course, have got to maintain the right of individuals to sell
on credit. I don't think Congress would have the authority to deny
individuals to make such transactions as they wanted to, and if I
wanted to give you 6 years' credit, I think that I've got a right to do so.
But if we don't require that to be evidenced by some kind of written
instrument, aren't we opening the door to a return of just about what
we have because the packer comes in and says: Yes, but I had an agree-
ment, we had an understanding that we weren't going to pay for 10
days or 2 weeks.
It is almost impossible to disprove that sort of thing. Is it logical
to. require that this would be a transaction where it says "unless other-
wise expressly agreed" in writing between the parties?
Mr. ImUOF. We could certainly insert that, Mr. Chairman. I did you
a disservice in that I stopped reading a little bit too short.
It says that:
Any such agreement shall be disclosed in the records of any market agency or
dealer selling the livestock, and in the purchaser's records and on the accounts
or other documents issued by the purchaser relating to the transaction.
There would certainly be no objection to inserting the terms specifi-
cally "in writing" there, but that was precisely what was intended.
Mr. POAGE. I didn't read the rest of that, and I think that attempts
to do exactly what I am talking about. I think if you add the words
"expressly agreed in writing" and then keep those words, then you
would clearly have it.
Mr. I3HOF. Your suggestion is to insert those words in line 13 on
page 5 between "agreed" and "between," I believe.
Mr. POAGE. Yes; that is what I would do. Is there any objection
on that?
[No response.]
Mr. BEDELL. Quite a lot of the cattle sold in our area is sold yield
and grade. So they pay according to the yield of the graded carcass
after it is slaughtered.
Mr. POAGE. Yes, I know that.
Mr. BEDELL. What would they do? Would they enter a written con-
tract and it wouldn't be paid for for 10 days?
Mr. POAGE. That's exactly what they would do.
Mr. IMTOF. That is correct.
Mr. POAGE. I just know how easy it is to come in and say: "Oh, yes,
we had a certain agreement." You can hardly prove the contract.
Mr. BEDELL. This would in no way interfere? That is, you could
easily enter an agreement with a farmer that you are going to pay
yield and grade and you will get your 10 days; is that correct?
Mr. POAGE. That's correct.
Mr. THORNTON. May I ask a question in regard to that?
Can such an agreement be an ongoing agreement or arrangement
between the particular farmer and the packer to the effect that sales
will be on the basis of yield grade until otherwise notified? Will that





37


suffice or will there have to be a new agreement signed at the time of
each new sale?
Mr. Imi- oF. Let me refer the question to Mr. Carter, who is As-
sistant General Counsel of the Agriculture Department. He has
worked with the enforcement of this statute for 25 years.
I wonder if I can address to him the question of whether or not the
agreement in writing between the parties, the packer and the livestock
dealer, has to be renewed eaiCh time there is a transaction or whether
there can be a continual course of dealing under writing under which
credit would be extended by the seller to the buyer?
Mr. CARTER. This is a provision that is not in the current regulation
of the Department. So I'll just speak to the language that's in the bill.
It would seem to me that the language would permit an agreement
that would be an ongoing agreement until modified or canceled by the
parties.
The language of the bill says: "Any such agreement shall be in
writing and disclosed in the records of the market agency or dealer."
There is no specific requirement that this be an express agreement
between the parties before each purchase of livestock.
So it seems to me on that basis it would be interpreted as meaning
that you could have a written and ongoing agreement until canceled
or modified by either party.
Mr. THORNTON. Certainly, Mr. Chairman, I would hope that that
would be the effect. However, in reading the language I was concerned
and wanted to get a clarification for the record because of the words
"otherwise expressly agreed between the parties" and at the conclu-
sion of the next sentence '"* * must be shown on the records of
documents issued by the purchaser relating to the transaction."
I was concerned in the rulemaking activities that those words might
be interpreted as signifying that we should require the seller to execute
the written document on each occasion on which he takes a head of
livestock to the market in order to continue the practice which many
sellers do follow, that is by selling by yield grade.
Mr. POAGE. I would not think that these words could be so inter-
preted, but they might be.
Mr. THORNTON. I think it would be sufficient if an appropriate note
is made that a continuing agreement is contemplated.
Mr. POAGE. We can note that in our report. We can say that we
don't require a written agreement for every particular transaction.
I talked to one gentleman who has sold stock to the American
Meatpackers. He lost a substantial amount of money. He said: I knew
their condition and I knew what sort of shape they were in, but I took
the chance.
That fellow would undoubtedly be perfectly willing to sign up with
a packer with whom he is dealing until further notice, that so much
credit would be extended to him. However, hundreds of folks are just
bringing in a small bunch. They don't want to do that.
Certainly they are going to insist ion signing up every time, so we're
not saying here that it has to be done, but it has to be expressly agreed
upon, and the agreement can be for a certain time or an unlimited
time.
We will make a note of that and put it in the report.
Mr. IBMHoF. Yes, sir.





38


The provision is modeled on the existing provision, the packers and
stockyards regulations with a small modification, but under that pro-
vision I understand from Mr. Bierman that the ongoing arrangements
are considered to be appropriate.
The second portion of section 409 which would be added to the.
statute by section 7 of the bill, Mr. Chairman, attempts to get at the
problem of the float. The specific provision:
Any delay or attempt to delay by a market agency, dealer, or packer pur-
chasing livestock, the collection of funds through the mails, or otherwise for
the purpose of or resulting in extending the normal period of payment for
such livestock shall be considered an "unfair practice" in violation of the act.
There's one more sentence there which you will observe, which is,
intended to make clear that this does not affect other unfair practices
of the statute which are already contained in the statute.
Mr. POAGE. Does everybody agree to that ?
Mr. HIGHTOWER. Mr. Chairman, during the hearings there was quite
a bit of discussion about this point and the possibility raised that we
might statutorily provide for some procedure that would cut down
on the float, I wonder if by phrasing it in this way are we anticipating
that the Packers and Stockyards Commission would issue some kind
of rule and regulation addressing itself to this question of the collec-
tion of funds or delay of collection of funds through the mail?
Mr. BAIZE. Yes.
Mr. IHOF. They certainly would be given authority under the
existing statutes to flush this out in the course of dealing with packers
and livestock producers.
Mr. HiGHTOWER. I just wonder how much we want to depend on that
or whether it might not be better to be a little bit more specific in
the language of the bill itself.
There was some question at the time of the hearings that we might
provide that checks could not be from a Federal Reserve district bank.
Mr. POAGE. Yes; and we ran into the problem of having so many
places that that would almost allow you to span a continent.
If you happen to be at the right place, then that might happen.
Mr. HIGHTOWER. I am a little concerned about this beina rather
vague because in collection through the mails our experience in my
own town, which is 50 miles from Wichita Falls and it would take 4
or 5 days to get a letter sometimes.
What is the normal transaction through the mail? How much
time should we allow for a mail transaction ?
I wonder if we could be more specific about the distance that is
involved and if we could be more specific about time.
I just raise that point and ask the staff about your thinking on
this. Do you think this language is tight enough?
Mr. ITmior. We gave it quite a bit of thought. Mr. Poa e has
explained some of the difficulty with some of the provisions that were
suggreested dNring the course of the hearings.
For example, that if he made payable on the bank in a Federal
Reserve district, or in an adioinino district.
But we did find that those districts cover enormous territories.
It, was difficult to see whether that would result in any substantial
1 r"ro vernnt.
Now. t ere are arbftrarv rules that exist in other areas. For example.
in -omo. T believe in ta Fderal ]Rules and Civil Procedure, there s





39


provision that you can serve another party by mail and if you do you
are permitted 3 additional days, which is an arbitrary period selected,
I assume, to account for the delay that would normally be encountered
in the mailing of a document.
It might be that the committee would want to consider something
like that, but we must recognize that any such selection would be
arbitrary and I don't know how useful it would be from the point of
view of the producer and the packer.
Mr. HIGHTOWER. I'm just concerned about the fact that they could
say that we put it in the mail and if that is going to be an automatic
excuse then there could be some very inordinate delays. They could
say, "We're sorry, but the mail didn't come through. We'll wait
another week."
Mr. POAGE. If we impose the burden on the packers and stockyards
people to make rules which would prevent this float, then they can
make rules much better than we can pass laws.
They change them a whole lot faster than we change laws.
It would seem to me that it's probably better that they make the
rules that would apply differently in Texarkana and in El Paso. There
are three Federal Reserve districts within 50 miles of Texarkana, and
two in El Paso.
You could make different rules to fit different places but we can
hardly by law say here, that if you live in one county in Texas and
another in Arkansas, that you are in three districts. We can't say
that if you live outside of those counties that you are not.
So it seems to me that placing this authority with the agency prob-
ably is desirable rather than for us to try to detail just what it should
be.
Mr. HIGHTOWER. I have no specific suggestions for a change.
Mr. BEDELL. I do have a suggestion. I would add a sentence which
would say in effect: "Any obvious attempt to obtain float by making
payment to a bank wherein the purpose obviously is to obtain extra
time shall be considered a violation of the act."
Mr. POAGE. As a matter of law, when you say obviously, what is it?
The rulemaking authority, I think, can pretty well cover it. But I
doubt if you can define here in the law what is an obvious attempt.
Mr. BEDELL. I'm not sure.
Mr. POAGE. The rulemaking authority, I think, can pretty well cover
it.
Mr. BEDELL. My concern is this: It would seem to me that if you
are a packer in Amarillo and you do all of your banking in some small
town with poor mail service 100 miles out, it is obvious that you did
that in order to obtain time on your float. You could do your banking
in Washington State and have it mailed to Texas.
It would seem to me that if we could put wording in which would
indicate that if it was held and that that was what you were trying
to do, then, that could be considered a violation.
I think it would be in our interest to try to put it into law.
Mr. POAGE.We are saying in the law that any delay or any attempt
to delay would be a violation.
Mr. BEDELL. Is there any way it could be worded at this time to
prevent such activity by the packers?





40


Mr. ImiioF. I believe in conjunction with the regulations to be
issued by the administration, Mr. Bedell, it certainly would. We don't
intend for the perfection of this language which certainly might be
improved. We did make a bona fide effort in conjunction with the
Department to draft some language which would accommodate the
problem.
I think it would, however, be useful in the report to indicate that
we are attempting to reach precisely the type of problem you just
described, and I would propose to do that.
I wonder if I could ask Mr. Carter to address that.
Mr. POAGE. Certainly.
Mr. CARTER. I want to just make one point. Mr. Imhof had indi-
cated that this was done in conjunction with the Department. We
were requested to give drafting service, but I want to point out for
the record that I am here today to give you technical advice based on
what limited knowledge I have in the area. We are glad to do that.
We are glad to offer our drafting services but this is not to be
deemed approval or disapproval.
ir. BEDELL. You didn't bring the Office of Management and Budget
with you?
Mir. CARTER. NO.
r. IMFHOF. No, Mr. Bedell. and I was not intending to suggest that
the administration sent this bill up here.
Mfr. POAGE. All right. Let's proceed. We get tb some sticky questions
now.
This is section 8.
Mr. BOR. Mr. Chairman, the next provision, section 8, has three
separate options listed.
The options are designed to treat the problem o.f an unpaid seller of
livestock where there has been a cash sales transaction.
The first option would make it unlawful for a packer to provide a
lien on livestock that has been purchased on a cash sales transaction
except where it's in excess of the amount that he owes to an unpaid
seller.
If he does place a lien on the livestock it provides that the lien shall
be unenforceable. This is the first option.
I might mention what it does not do. This makes it unlawful for a
packer to place a lien but it does not affect any liens imposed by statute,
such as a tax lien, and a tax lien would still operate unaffected by the
provisions of this section.
What it would do in the event that there is a lien that has been
placed by a packer which is prohibited by this act is to make it uin-
enforceable. Therefore, the person to whom the lien was extended
would no longer be a lien holder and in the event of bankruptcy would
be a general creditor sharing along with other general creditors in the
assets of the bankrupt and would be paid only after the claims of lien
holders and creditors with priorities had been satisfied.
That's option 1.
Option 2-I mialht also mention that in option 1 the unpaid seller
is not provided a lien. He remains in the same situation as he currently
is.
Option 2, as distinguished from option 1, would give the unpaid
seller a lien in the event there was a cash sales transaction. He would







have a lien that would have priority over any other liens including
tax liens and other liens that are created by operation of law.
So option 2 would give special protection to the unpaid seller by
providing him with a lien and in the event the packer had given a
bank a lien in order to obtain credit, that lien would still exist but. it
would be secondary to the lien that had been created by this provision
for the benefit of the unpaid seller.
Mr. THONE. Mr. Bor, I notice they are not necessarily mutually
exclusive, are they?
Mr. BoR. That's correct. You could, for example, adopt option 1
which would make it unlawful to provide a lien in favor of another
party and at the same time adopt option 2 which expressly gives the
unpaid seller a statutory lien which would benefit him and protect him
against tax liens and other liens that are created by operation of law.
Option 3 takes a third tack. This was derived from a court of appeals
decision which dealt with the situation of an unpaid seller of livestock.
This option provides that if a person had sold livestock to a packer
in a cash sales transaction and had not paid the seller, the seller would
be holding the livestock under a trust arrangement for the benefit of
the unpaid seller. If he did, in fact, subsequently sell the livestock. then
the receivables and proceeds would also be held in trust for the benefit
of the unpaid seller.
We intended to add a couple of words to this section. After the word
"receivables" in line 19 we would like to add the words "and proceeds"
to make clear that the trust would apply not only to the receivable but
also to any cash that might have been realized by the packer upon the
sale of the meat products to a third party.
We have another suggestion for option 3 and that is we neglected to
include the definition of cash sales which we have included in options
1 and 2 as an additional paragraph.
We would just add a paragraph (c) which would be identical to
paragraph (c) on line 5 of that same page.
There is one final addition which we would like to suggest for con-
sideration in option 3. This would make it clear that payment would
not be considered to be made if a seller of livestock had received a
payment instrument which had been dishonored.
For example, if he had been given a 1unm check or a draft which
was dishonored, then the fact that he had received the check or draft
would not constitute payment for the purpose of this section.
Mr. POAGE. I think that right here is probably the biggest issue to
come before us. It occurs to me-the question occurs-do we need any
of these, having made the provisions we have heretofore about the
prompt payment, and we have provided for prompt payment. Then,
do we need to put any of these three provisions in about liens?
As I understand it there is a recent court decision to the effect that
as a matter of fact the title doesn't pass until payment is made. I pre-
sume that that, of course, recognizes the title to pass if there's an
agreement as to the time, but if it's a so-called cash sale, the title has
not passed until the payment is made.
Doesn't that give all the protection that we can write in here about
liens?
Mr. BoR. Mr. Chairman, that decision is a fifth circuit decision,
and has not been applied to my knowledge in other circuits.





42


There has been a petition for rehearing filed with the fifth circuit
so we are not altogether sure whether that particular decision will
become the law in the fifth circuit.
You might want to consider these three options in light of that
situation.
It is true, however, that the fifth circuit has ruled in a decision
last year that when you have an unpaid seller, in a cash sales transac-
tion that title has not yet passed to the buyer.
They do have a qualification; the unpaid seller would prevail
against the bank who had extended credit to the packer if the bank
had reason to believe or know that the packer had not made payment
for livestock it was purchasing from livestock owners.
In that decision the facts were pretty clear that the bank was
aware of the pattern of conduct that had been engaged in by the
packer.
Mr. POAGE. We have that problem in any of these liens. We have
the problem of notice because it is extremely difficult-I am not going
to say it is impossible-to identify the particular lien.
Certainly, once it's cut up I don't think it can be done. At one time
I had suggested that maybe we ought to prohibit the breaking up of
a caucus for a couple of days to give time for the seller to get his
money. He could still identify his meat.
Any of these options, any of these lien provisions-of course, we've
got to recognize in the first place they do restrict the credit of the
processor. The processor obviously can't get as much credit if we have
those provisions in there as he could otherwise, or it may cost him
a little more.
I think we must not overlook the fact in passing this kind of
legislation that whatever costs is involved-and there is cost involved-
whatever cost is involved is going to be paid by the producer. It is
fallacious thinking, well, I won't talk about yesterday's action on the
floor because there was a lot of voting that was not based upon
thinking yesterday.
Anybody is just fooling themselves when they think that you can
add costs to the packer and get just as much money for the producer
as you could before you added the costs.
Packing profits aren't large enough to justify that. Those costs
are going to be passed either to the consumer or to the producer and
I grant that if you have a very strong demand for meat as we had
about 3 years ago, you pass it on to the consumer.
About 90 percent of the time they are going to pass back to the
producer and I think it would be rather ironical for this committee
to pass out some legislation here that simply put an unreasonable
burden on that producer to cure something that didn't amount to as
much as- the burden that went with it.
M[r. THONE. Mr. Chairman, I agree with you. I was with you all
the way yesterday. I preface my remarks here because I really want
to have your attention on this.
Mr. POAGE. YOU have it.
Mr. TIIoNE. Central to the issue is this section, that is the so-called
lien, it is controversial. Chase Manhattan Bank has gotten hold of
me a couple of times. They are very concerned. I am sure they are





43


sincere, feeling that we could overreact here and in the long haul
hurt the very people we are trying to help.
Frankly, 99.9 percent of this legislation is for those producers out
there in Nebraska. Many of my constituents, as you know, Mr. Chair-
man, got caught in that American Beef situation. Understandably,
they are very upset and rightly so.
But, if we do everything in this bill that I hope we can do with
prompt payment and solvency, bonding and preemption and I'd like
to go a little stronger on preemption that I think we have gone so
far, Mr. Chairman.
I think we ought to preempt the various payment aspects of this
bill as well as bonding, because I think that proliferation again, as
you say, is only going to add expense and ultimately going to come
out of the pockets of our producers.
If we don't establish some sort of a lien provision here for our
sellers I don't see that we've done them much good in this whole
area, to be very candid with you. The only section that addresses
the problem of American Beef with our producers is this lien section.
I noticed our good friends from AMI who are in the room here
hit the issue clearly. I can't argue with their argument on this, but
I think there is an overriding consideration here.
We won't get any support for this bill in my country, Mr. Chairman,
unless, we give a lien to the sellers of this livestock.
Frankly, it bothers me a little that the industry people feel that
they have to have a lien on livestock which they have not paid for.
I know that the banks are in the limelight quite a bit on their
whole credit policies. It's all over the newspapers.
I talked to Mr. Bierman yesterday at some length as to how this
would affect financing to some packers. He concedes that it will, in
some instances. There's no question about that at all.
So I guess it is a matter of priority here, as I see it.
Frankly, my priority would have to come down to the producers
who are not sophisticated sellers in many instances. When you talk
about the livestock chain as contrasted to the meat chain then I think
frankly that the guts of this bill is right here in section 8.
We have some hard choices to make as we frequently do. I think we
have to have a strong lien section.
I don't know if I totally understand option 3. T know what it is
meant to address, but as of now I would like to see both options 1 and
2 remain in this bill. If that is not the consensus of this committee, I
would certainly opt strongly for option 2.
I could go on and on, Mr. Chairman.
Mr. BEDELL. Are we going to include in this legislation bonding
requirements?
Mr. POAGE. We have not reached that.
Mr. BEDELL. I don't find it here. Is it in this bill?
Mr. TIHOF. I'm sorry, I missed your question.
Mr. BEDELL. Bonding requirements, are they in this bill?
Mr. INIIOF. They are in the first section on the front page of the
bill, yes.
I might say to Mr. Thone that the pre-emption provision about
which he was concerned is in the very next section of the bill on page 9.








Mr. THONE. Has it been changed to cover the payment aspects as
well as the bonding?
Mr. IMHOF.Yes; it has.
Mr. THONE. That's fine.
Mr. IMIHOF. That section was added in addition to what you had in
your bill.
Mr. BEDELL. Have you already discussed the bonding requirement?
Mr. IMHOF. Mr. Thone just addressed it. We had not quite reached
it.
Mr. BEDELL. May I know what was decided because I think it makes
some difference in the lien requirement? What was the feeling of the
committee in regard to bonding requirements?
Mr. POAGE. It was the Chair's understanding that the committee
favored the bonding.
Mr. BEDELL. What are those bonding requirements?
Mr. HIGIrOWER. Would the staff have the section for Mr. Bedell?
Mr. ImHOF. We have reference to page 1 of the committee print.
I wonder if you have a copy of the statute, Mr. Bedell?
Mr. BEDELL. Are we requiring the bond that covers 2 days' kill or
1 day's kill or a given amount?
Mr. IVlIIOF. I believe the amount of the bond is left to the discretion
of the Secretary of Agriculture. It is not established in the statute.
Mr. BEDELL. Is that the way it is now?
Mr. ImiJOF. Yes. The only change would be that the packers would
be included in the category of people who would be required to obtain
a bond to do business.
Mr. BEDELL. Let me echo Mr. Thone. My people out there are not
going to be very pleased with this legislation unless we specifically
specify what we have in mind in terms of bonding.
Mr. POAGE. We have heretofore authorized the Secretary to require
bonds of these auction rings, for instance. We have authorized him to
require bonds in certain cases. He has exercised that authority.
The present law does not give him authority to require bonds from
packers for them to indemnify sellers to them.
Section 1 confers that authority on the Secretary. The same kind of
authority has been conferred on him at an auction ring. It has been
exercised so we can't say the Department hasn't exercised it because
they have, just as far as the present law authorizes it.
What we do in section 1-you lawyers check me if I am wrong-
what we do in section 1 is to extend that authority that he now has
so that he would have the same authority to require bonds of packers
as he has in the auction ring.
Mr. Ti-ioNE. The statutory language is that he may require reason-
able bond?
Mr. POAGE. Yes. He has required that where he had the authority to
do it.
Mr. Tnom. He requires a bond on 2-day kill; is that right, Mr.
Bierman?
Mr. IMITOF. If I might read the present provision it might clear this
matter up.
It would not be on a 2-day kill, but 2 days is correct. If I might just
read this provision in the regulation.






45


Mr. TIHONE. Please.
Mr. I 3HOF. I am reading from regulation 201.30. It says: "The
amount of each bond", and this is from marketing agencies and dealers
at the present time because the statute does not presently include
packers, "each bond shall be not less than the multiple of $2,000 above
the average amount of sales of livestock by a market agency or pur-
chases of livestock by a person buying livestock as a market agency or
dealer or both during a period of 2 business days, based on a total of
such business days, and the total amount of such transactions in the
preceding 12 months or in such substantial part thereof in which such
market agency or dealer did business, if any, provided the bonds above
$26,000 shall not be less than the next multiple of $5,000" et cetera.
The formula goes on, but that essentially is that Mr. Thone is correct.
It is based on 2 days.
Whether that would be reasonable in the case of a packer I am not
prepared to say. Perhaps Mr. Bierman could address that.
Mr. BIERMAN. As Counsel mentioned, our current bond require-
ments are for 2 days' purchases up to $50,000 and 10 percent of the
amount above $50,000.
If this legislation is enacted and the Secretary is authorized to re-
quire bonds of meat packers engaged in the purchase of livestock,
then we would necessarily have to hold some hearings and find out
what is a desirable and reasonable amount of a bond needed to pro-
tect livestock producers.
At this time, I can't say what that would be.
Mr. THONE. If I may, Mr. Chairman, I would suggest to Mr. Bedell
that this is an adequate position. I don't believe that we will want to
spell that out in the statute, because there might be difficult consider-
ations for packers and the other people. I don't know. Maybe you feel
strongly about this. You certainly have the authority to specify the
bonding provision with exactness, but I don't think it would be wise.
Mr. B aEETL. I realize that argument but the problem I have is that
I think we have seen many cases where both you and I have not been
real pleased with the actions of the Department in various areas.
I feel fairly uncomfortable whenever we turn things over to the
Department for them to make the decision.
If we have that option then we could come back with the legislation.
Mir. THONE. All of the experience we have had with the Packers
and Stockyards Administration and Mr. McLean and his people, we
have had nothing but total cooperation. They have done an exemplary
job with the tools they have available.
As we indicated the other day, they lack some of the necessary tools
and we are giving them the tools.
'Mr. BEDELL. I have no armment with that.
Mr. FINDLEY. Mr. Chairman, in reading option 3 the key words
seem to be that the livestock shall be held by such packers in trust
for the benefit of sellers until full payment has been received.
This seems to some extent the ruling of the district court. Is there
some reason why we could not say directly that title shall not pass
until payment is made or payment is received? It would seem to me
that that is less ambiguous and would be a better approach to the
problem.


79-314-76-4





46


What are the problems that would flow from such a provision of
law ?
fr. BoR. One of the reasons we did not mention title was that that
raises the issue of who has the risk of loss when the livestock is in the
hands of the packer. If we did mention title, I think we would want
to say that the risk of loss, however, would be at the risk of the packer
rather than the livestock owner, who had lost dominion over the
livestock.
.r. FINDLEY. Is that the only objection to that approach?
Mr. BOR. The other problem was the problem that you run into
when the livestock is being sold.
As Mr. Poage had pointed out earlier, livestock remains in the hands
of the packer for a relatively short period of time. The livestock is
slaughitered, and the meat products are sold in a prompt manner.
Iat we have done here is provide that regardless of whether the
packer has livestock, meat products, receivables, or cash proceeds-
all are held in trust for the benefit of the unpaid seller.
If we are dealing merely with the question of title, then you run
into the problem of title after the livestock has been disposed of.
Mr. HIGHTOWER. May I ask a question, please?
Mr. POAGE. Yes.
Mr. HIGHTOWER. I am not sure I understand the business of holding
in trust and the responsibility of a trustee.
Is there a conflict of terms between buyer and trustee and seller
and beneficiary? Is there a conflict of terms? Can you be a buyer and
a trustee, and a seller and a beneficiary?
Mr. IXHOF. The thrust of the bill would be that a fiduciary in a
sense would be the buyer or the packer.
Mr. HIGHTOWER. How about the beneficiary?
Mr. IMIIOF. Under the case for which this case was modeled, Mr.
Hightower, it was the intent that the producer would be the beneficiary
and the packer would be a sort of trustee having the beneficial owner-
ship of the livestock until such time as he received payment, actual
funds for his livestock.
Certainly we did not intend any conflict there.
Mr. HIGITOWER. Buyer is usually used in connection with the term
"own." Having bought you own.
Mr. IiMHOF. Once you have paid for it.
.[fr. HIGHTOWER. All right. Here we are going to spell out that he
is going to be a trustee. We want to be sure that the trustee has all
of the responsibilities ordinarily required by law of a trustee.
Mr. Boiz. We can make this clear in the committee report. It was
our intent that under this option he, the packer, would be a fiduciary
responsible to the unpaid seller or the livestock and the meat and the
proceeds until he had made payment for the value of what he had
acquired. This, we thought, would give protection to the livestock
owjer from claims from other parties.
Mr. PoAm;1. I would like to make miy own viewpoint clear. I am not
trying to bind anybody else because anybody can make any sugges-
tions they want to.
It seems to me that inasmuch as we have adopted bonding, we've
adopted the prompt payment, we've adopted the solvency test, that
we've given about all the protection here that we can afford to give.






47


All these things are costly and all of them are going to fall either
on the producer or the consumer.
It seems to me we've given just about all we can. I don't think we
gain very much by these lien provisions. I don't know what they get
for you. You've got a bond. The packer is bonded to pay you. If that
bond is good, you don't need a lien on anything.
Ar. HIGHITOWER. I think it came out in the hearings that a 2-day
bond is probably not going to be adequate for the big packers.
Mr. POAGE. Well, we have the provision in here to make the pay-
ment. There is prompt payment here. If he fails to pay for it, then
he becomes insolvent. We have a bond here.
Mr. HIGlTOWER. We have a 2-day bond.
Mr. POAGE. It covers 2 days; that's correct.
Mr. HIGHTOWER'. Then we have the provision on prompt payment
that the Commission would be able to make rules and regulations that
would anticipate payment by mail which could be considered in more
than 2 days.
I just believe that those two provisions alone would not cover it.
We probably will need a certain kind of additional provision.
Mr. POAGE. ,Tust how much help would that be?
There are not very many producers. In the American meat packers
area you have a lot right now, but that's the first insolvency of that
kind in 15 years, isn't it?
Mr. HIGFITOWER. I think so.
Mr. POAGE. There are small ones, of course, but you do not get very
many losses on this.
While we want to protect people from these losses, the losses are
not very frequent. You have to pay for these other expenses every year.
It does not take many years to make this thing cost producers more
than producers get. In other words, the insurance premiums are get-
ting altogether out of line with the benefits you are going to get if you
suffer a loss.
Mr. FINDLrY. Mr. Chairman, I agree with the chairman's comment.
I think there is something to be said for entering into reform by
stages. The bill without section 8 would constitute a considerable
adv-ance or reform. I would like to see us have a period of testing but
maybe we will have to come back with some kind of lien provision.
The committee will be in business next year and the year after that.
I move that we strike section 8 from the subcommittee print.
Mr. POAGE. This would mean that we would eliminate the lien
provisions.
Mr. FINDLEY. Yes.
Mr. POAGE. Anybody want to be heard on that?
Mr. THON'E. Yes.
Mr. Carter, I just want to clear up something. There is some con-
fusion, I think, on the three options.
Option 1 is the anti-incumbents; option 2 is the priority lien period.
Come to option 3. Would it be the intent of this option that the
specific livestock products, or receivables, or proceeds would not have
to be identified by the producer under this? Would you have that
problem?
It seems to me that if we had to identify them specifically we would
have mechanical problems.





48


Mr. CARTER. In case the packer had financial problems, he certainly
would have to have some way of identifying what livestock was in his
possession and what proceeds and receivables and inventory he was
holding in trust.
So there would have to be some kind of accounting system devel-
oped so that could be ascertained.
Mr. T TONE. Could we make it clear that that packer is the trustee
for the seller?
Mr. CARTER. Yes. I gather that that is the real purpose of that
section.
Mr. THONE. In effect it would do it, would it not?
Mr. CARTER. Yes.
This provision, I would assume, is designed to really put into the
act the concept which the Court of Appeals had in its decision, that
is the trust theory-
Mr. THONE. Let me argue a little with you on that.
We have an opinion down there from the Fifth circuit. That is a
long way from flying it nationally or as you indicate even appeal it
to the Supreme Court.
But, statutorily, here we could put into effect exactly what that
circuit court down in Texas did, could we not, by option 3?
Mr. CARTER. Option 3 is to accomplish that purpose.
Mr. THONE. You've been down there, Mr. Carter, for 25 years in-
terpreting these laws.
Of option 1, 2, or 3, would you strongly prefer one of them? If you
had to defend it legally, would you prefer option 3?
Mr. CARTER. I am not in a position to express an opinion on which
option is best.
Mr. THONE. From your long experience and legal work on this, is
option 3 totally administratable and could it be effective for the pro-
ducer along the lines that I have discussed before, in your opinion?
Mr. CARTER. From the standpoint of the administration of it I think
it is going to be mostly the burden of the packer and whoever
is financing the packer to be certain that there is some type of aount-
ing system that would provide for the ascertainment of what is in
trust. So, from the standpoint of the administration of the act, I
wouldn't think it would be much of a burden for the administrators.
In option 1, you don't get to the question of whether a statutory
lien is or is not needed nor do you get to the question of what happens
in a trust, because one makes it unlawful to encumber initially and
then provides that any contract or arrangement in violation of that
is unenforceable.
So you are cutting off this area of financing. You are cutting off the
availability of the unpaid livestock, and receivables, and inventory.
It's unlawful to be encumbered. If you do encumber it then it is a
useless task because you cannot enforce it.
Mr. THONE. Do you think you should be able to encumber some-
thin you haven't paid for?
Mr. CARTER. That's the thrust of this provision.
Mr. TjiONE. You should not be. I think it's sound. I really do.
Tie only other thought I have on it is this: I oppose the Findley
amendment to strike because I don't think we've done too much for





49

that producer out in northeast Nebraska in this whole legislation un-
less we give him this type of protection here.
As Mr. Poage says you have the packer bonding but as Mr. High-
tower points out it covers 2-day kill which is not enough if you have
a bankruptcy, and we've had 167 of them in the last 15 years, as I
recall.
I think that the producer out there is looking for this type of specific
protection if he sells his livestock to a packer who goes into bank-
ruptcy.
I don't think the bill gives him much. It gives him some, Mr. Chair-
man, but not all he deserves.
I would then go for option 3 with some clarifying language in the
report. I think it's probably the most practical of the three options.
Mr. POAGE. I don't want to confuse the question. Maybe it will con-
fuse it, but it seems to me that maybe we ought to determine, if we're
going to put these kinds of things on, are we going to do anything to
relieve the burden on the packer-and I think we are putting a sub-
stantial burden there-I question whether the burden is worth the cost
or not, but should we then consider the question of making the pur-
chaser from the packer pay?
The packer comes in and says-and I think with a good deal of
merit-"We can't go through all of this and still we don't get pay-
ment. We can't get prompt payment from the chain stores."
Now it's true that no one walks out of the chain store with a piece
of meat without paying for it. The store has cash, but they don't make
payments to the packers, so the testimony was, for at least 3 weeks
or a month after they receive the meat. So they ride that.
That runs into a substantial amount, of interest over the year. We
ask why don't the packers require us to do this?
Some individual packer is going to say, "Yes, I will extend in-
terest." When we ask packer A why he extends this credit and why he
does not require Safeway and A. & P. to pay cash, then he says, "I
can't because packer B would extend the credit in order to get my
business." So we say that that condition occurs over everybody's busi-
ness. He says,
Yes, but under the Packers and Stockyards Act and under the consent decree
and under the general anti-trust laws, I cannot talk to packer B and I can't de-
cide upon a general policy with him and we cannot come to any agreement as to
the terms which we would extend because that violates the antitrust law.
The result is that his credit becomes more and more a matter of
whipsawing. It puts the packers in the position of needing a substan-
tially larger amount of credit than they would have to have otherwise.
The question rises as to whether or not we try to impose some limita-
tion on the chain stores or any other purchasers-I don't simply want
to say the chain stores-but they are the biggest purchasers of this
meat.
Do we want. to require the purchasers of this meat to pay? They've
already got their money. They get their money whether it's a restau-
rant or whether it's a chain store, they get their money when the meat
leaves their place.
But they ride the packers for several weeks. Do we want to try to
give any relief there? If we're going to be equitable and it seems to me





50


we have to be, and if we do involve ourselves, of course, in still further
governmental interference in the realm of business.
Mr. HIGHTOWERI. Mr. Chairman, not to belabor the point, but let me
say this. The whole purpose is to try to bring equity to the producer
and to try to guarantee his money and it seems to me that everybody in
business, the meat-processing business, can benefit from the float ex-
cept the producer. And all we are trying to do is push it back one step
and tell the packer that he had better pay.
If the packer wants to work out a credit business with his whole-
saler and consumer or whatever, then let the ordinary course of busi-
ness go. However, the producer has nowhere else to go.
Mr. POAGE. That packer cannot work it out because we said he
couldn't. By law we have prevented him from doing it.
If we took away all of the legal restrictions, I would say that that is
exactly right. But we've already made it a criminal offense to talk to
packer B. He can't get together like farmers might get together and
other men get together. They all have their right to do it, but the
packers haven't. They are prohibited by law from getting together on
this.
Mr. ENGLISH. Mr. Chairman, we are here talking about the question
of free enterprise.
Mr. POAGE. Yes, we are.
Mr. ENGLISH. If we have one packer who says he is going to extend
credit, all the chain stores will then want to' buy his product. That
situation may also develop with some of the smaller packers. The big
ones will use the law and come back to the chain stores and say, "Look,
there's no way that my profit margin allows me to operate in this man-
ner. Therefore, I will demand prompt payment because of this law."
We have seen that take place. Whenever one of these laws comes
out it's awfully convenient to have it used that way.
I think that will happen with a lot of the big packer companies,
but a smaller packer will try to undercut him and say in effect, "What
we're going to do is extend you credit for all of this meat that you
are going to buy from us." He probably will not be in business very
long if he is operating on a small profit margin.
If he has a big profit margin, then he-may have something to play
with, but I don't feel that these large profit margins widely exist,
particularly with some of these small packing companies.
I think the opposite is going to happen. The big-one would love to
have the excuse to go to A. & P. or somebody else and say that they
have to get prompt payment.
I think all of them would jump on the bandwagon.
Mr. TITORTON. Mr. Chairman, I must apologize that I was not here
during the time of the hearings and therefore may not have infor-
mation that is available to other committee members.
I should like to say this: I do agree with the chairman's views es-
pecially as to options 1 and 2. It seems to me that they would im-
pose a(lditional costs on the process.
However, I do have some questions as to whether option 3 would
have those penalties attached? In fact, option 3-and this is strain-
inv my recollection a bit back to Uniform Commercial Code days-
but it seems to me that it's pretty close to an effort to restate what







the law probably is in regard to some of these transactions, at least
it has been indicated that this is a restatement of what the law is in
the fifth circuit.
It does seem to me to be basically fair but I have some specific
quesions that I would like to know about.
What is the effect of this trust? If a later sale is made by the
fiduciary to a third party, is the result that whatever goods are in
the hands of the third party would flow through a bankrupt fiduciary
to the beneficiary?
Mr. I31IOF. That is the intention of the provision, yes. I believe
that is the result that is achieved in the Samuels case in the fifth
circuit.
Mr. ThORNTONv. That seems fair to me.
Is it your expectation that this is the body of law that is likely to
prevail or not? Can you address that?
Mr. IM1HOF. Without the statute, sir ?
Mr. THORNTON'. Yes.
Mr. bAmF. That is up for garbs, I understand.
Mr. Born Mr. Thornton, initially the court of appeals in the fifth
circuit in the case of ln re Samuels & Co. interpreting the Packers
and stockyards law came up with a position that is essentially option
3. They said in effect that the Packers and Stockyards law superseded
in their mind's eye the provisions of the Uniform Commercial Code.
Mr. THORNTO-N. That was the question I had.
Mr. BoR. A petition of certiorari was then filed with the Supreme
Court and the Supreme Court overruled the fifth circuit, saying that
after reviewing the packers and stockyards law they disagreed with
the position of the fifth circuit, and that in fact you had to look at
the local law to determine what were the rights of an unpaid seller of
livestock.
So the case went back to the fifth circuit and the court then ex-
amined common law and the uniform commercial code and instead
of following the trust theory, it said in effect that title never passes
when you have a cash sale where the buyer has not made payment
for the purchase price of the livestock.
It stated that the Commercial Code in their view had not changed
the common law, and reached the same result that it reached the
first time in protecting the rights of the unpaid seller but by a dif-
ferent route.
That decision now again is subject of a petition for rehearing and
we don't know how the court will ultimately rule.
But we thought that examining these two alternatives, the way the
court in the fifth-circuit first came out and the way the court came
out the second time, it would perhaps make more sense to handle it
as was done in option 3 by saying that the packer was a fiduciary
holding in trust the livestock or the proceeds which he realized from
the sale of the livestock products-all for the benefit of the unpaid
seller.
Mr. THORNTON. That helps me considerably. I must say I wish I
had the time to understand more full the differences.
But, as I understand it, this would be an effort to establish by
statute an overriding rule of priorities which would prevail as against





52


Uniform Commercial Codes and other laws that might result in vary-
ing interpretation throughout the United States.
Mr. IMIOF. That is exactly correct, Mr. Thornton.
Mr. POAGE. Mr. Bedell has a question.
Mr. BEDELL. I need to understand the difference between numbers
1 and 3. As I understand it, number 1 says that persons cannot give
a lien on any property that he has not yet paid for and he doesn't
own. Is that correct?
Mr. IMHOF. Yes.
Mr. BEDELL. Can't he ship that?
Mr. BoR. He could ship the goods to a customer but what it says is
that if a bank extends credit and obtains a lien, then that lien will be
held to be milawful and unenforceable.
Mr. BEDELL. In option 3 he could neither get a lien nor shipment to
a customer. Is that correct?
Mr. BoR. No. He could ship the livestock or meat products to a
customer, but when he did so, the accounts receivable and the proceeds
that he received would be held in trust for the benefit of the owner
of the livestock.
Mr. POAGE. All right. Maybe we can narrow this down. I think we
have discussed it thoroughly.
All those in favor of the Findley motion to strike all three of these
options will hold up yQur hands.
Opposed?
There being two ayes and 4 nays the motion fails.
Does anyone want to propose any one of these options?
Mr. ENGLISH. I would like to move the adoption of option 3.
Mr. POAGE. It has been proposed that we approve option 3.
Mr. THONE. Mr. Chairman, very briefly let me ask unanimous con-
sent, so there is no confusion on this, for this.
In line 14 in option 3 it reads: "When payment is not made for the
livestock and that such arrangements are contrary to the public
interest."
I would like to add a proviso: "Provided, however, that an invalid
payment instrument shall not be considered payment." I would like
to have unanimous consent to put that in. There have been some court
problems, as I understand it, where they give a -bogus check or some-
thing and then they are out from under it because they did supposedly
make payment.
It's a technical change.
Mr. Born. Mr. Thone, as we had read this provision we had suggested
an additional sentence in paragraph 5. It would say that payment
would not be considered to be made if the livestock owner -had received
a payment instrument which had been dishonored, or something to
that effect.
Mr. THONE. Yes. Where was that again, Mr. Bor?
Mr. Born. This would be an additional sentence at the end of para-
graph (b) on line 23.
Mr. THONE. I missed that. That's essential, I think.
Mr. POAGE. I think we agreed on that, didn't we?
M'rr. 'joNE. It passed by me, Mr. Chairman.
Mr. POAGE. If there is no objection we will consider that inclusion
in option03.





53


Mr. English moved that we adopt option 3. All those in favor of
that say, "Aye."
[Chorus of ayes.]
Mr. POAGE. Those opposed?
The ayes have it. We will adopt option 3.
Mr. Ibmior. Mr. Chairman, just to insure, in our earlier discussion,
I think the committee decided to include proceeds with meats and
receivables in one of the options. I assume it is in all three options.
Mr. POAGE. We've adopted three and we've put the proceeds in
option 3, so it's in there.
Mr. IM IOF. Thank you, Mr. Chairman.
Mr. POAGE. Now let us see if we can hastily finish this up. Maybe
we could have save a week or two.
Let's proceed with section 9.
Mr. IXIIor. On section 9, on page 9 of this bill, Mr. Chairman, I be-
lieve we discussed this briefly earlier with Mr. Thone.
It is a pre-empted provision for both the bonding" and the prompt
payment provisions of this bill from all State requirements for pur-
poses of people who are subject to this statute.
Mr. POAGE. Is there any objection to section 9?
Mr. HIGIHTOWER. May I raise the question about whether or not it is
desirable to preempt where some State would have a severe bonding
provision and prompt payment provision?
Mfr. TIHONE. I would strongly urge that it is.
Mr. POAGE. If there is any purpose in the world of preemption, it
goes both ways because you have that same diversity regardless of
whether it goes up or down.
All those in favor of approving section 9 say, "Aye."
[Chorus of ayes.]
Opposed?
Mr. POAGE. We have approved section 9. We will pass to section 10.
Mr. 13mor. Section 10, also on page 9 of the bill, Mr. Chairman,
would authorize the Secretary of Agriculture to conduct a 2-year
study on the problem the chairman discussed a few minutes ago, the
payments and the specific promptness of payments by retailers and
others to packers of meats.
The Secretary would have to report on an interim basis after the
first year of the study and present the final report within 60 days of
completion of the 2-year study as to what his findings were and as
to whether he recommended any legislation to deal with any problems
he might encounter during the course of the study.
Mr. POAGE. Of course, in keeping with my general policy, I think
that is just a total waste and worse than nothing and jeopardizes the
whole bill.
You've left it blank as to the amount of money we are to put in there
but if we don't put this section in, we will not have any additional ex-
pense. If you put this section in, you bring this into the budget situa-
tion and I think that the best way in the world to kill this bill is to
bring in some fool study.
MNr. HIGHTOWER. I move we delete this section.
As I understand the Budget Act, we could not consider this until
after March 15.





54


Mr. POAGE. That's correct.
Mr. IIOF. I believe the situation is that the appropriation, could
not be made but that the committee would have to report the bill out
with such a provision in it prior to the 15th.
Mr. POAGE. The motion has been made that we strike the section;
All those in favor of striking the section will say aye.
[Chorus of ayes.]
Those opposed?
Being unanimous, we will strike that section.
Now we have section 11.
Mr. IMHOF. That's your standard separability clause preserving
the provision which is not stricken down by a court.
Mrfi'. POAGE. Is there any objection to that section?
The Chair hears none.
The Chair wants to repeat, and I recognize this is a mere formality,
but I feel that we ought to consider moving some funds into the hands
of these packers as well as moving funds out of their hands. I feel
that we ought to consider a section requiring prompt payment by the
purchasers from the packers.
Mr. SEBELIUS. The day after receipt?
Mr. POAGE. There ought to be some provision. I'm not sure. I just
want to put this through the committee. I'm afraid that is only my
own opinion.
Let me see if I can put it this way:
All those in favor of trying to work out a section that would bring
in receipts from the purchasers to the packers will holdup your hands.
There are four.
Those opposed?
The CLERK. There are two.
Mr. THONE. It grieves me a bit. Maybe I should have hollered sooner
because I do think it is going to delay us.
Mr. POAGE. I know it delays us.
Mr. THONE. I want to defer to the chairman. He has been vevy fair
on this bill. That's why I sat here and did not vote either way.
Frankly, when you come back with your recommendations I think
I have made up my mind totally on those and I would strongly oppose
getting to any priority on the end of this thing.
I think these are sophisticated situations.
Mr. POAGE. If the majority is going to oppose anything, there is no
use delaying the bill by a week or two simply to come back here and
go through the procedure.
Mr. SEBELIUS. Let's take a look at it.
Mr. POAGE. That suggestion is fair enough.
Mr. SEBELIUS. We'll take a look at it in the full committee.
Mr. BEDELL. How soon to the full committee?
Mr. POAGE. Next week maybe.
M[r. BEDELL. I would like to have a few days to look at this. I would
like to get some input from some of my people and some of the
pJa kers so we might be more aware of any possible potential problems
with the legislation.
Mr. POAGE. I fully agree that we should do that.
However, we will have the opportunity in the full committee to
present anything of that kind.







It seems to me that getting a meeting of these committees is a major
undertaking.
Mr. BEDELL. I would hope that we would have a week before it went
to the full committee.
Mr. SEBELIUS. You will have more than that. AVe only have 3 days
next week so it would have to be the week after next.
Mr. Tiox-E. The next committee meeting is at 10 o'clock February 24.
I would hope we could bring it up that day.
Afr. POAGE. We will try to bring it up that day.
Mr. FINDLEY. May I bring up another matter?
Mr. POAGE. Is there a motion?
Mr. THORNTON--. I move we approve the bill as amended and report
it to the full committee.
Mr. POAGE. The motion has been made that we report the bill with
the recommendation that it pass as agreed in the subcommittee and the
staff will prepare another committee print-there are only a few items
to be changed-to present to the full committee.
All those in favor say aye.
[Chorus of ayes.]
Those opposed?
[No response.]
Mr. Boir. Mr. Chairman, would you like to report to the full com-
mittee the revised committee print or would you prefer to report the
bill H.R. 8410 that had been originally introduced with the amend-
ments adopted by the subcommittee.
Mr. POAGE. I think that would be good.
If you prepare the committee print so the committee can under-
stand it, I would appreciate it.
We will report the bill, the original number that was introduced,
but prepare a committee print to enable the committee to understand
what we have for them.
Mr. Findley?
Mr. FINDLEY. The Packers and Stockyards Administration has been
engaged in something I was not aware of until very recently.
There is a program under which percentage commissions are being
outlawed. I don't know whether other members of the subcommittee
are aware of this or not.
It came to my attention because a sale barn in my hometown wanted
to change the fee for handling market hogs. They wanted to continue
the per head charge but raise it somewhat.
They were told by the packers and stockyards that if they did that,
they would have to discontinue their percentage commission charges
for all of their types of animals.
Rather than do that, they decided not to sell hogs anymore, which
has resulted in the loss of markets for the farmers of that area.
I have drafted a bill which would prohibit the administration from
outlawing commission rates. I hope that isn't necessary. I wonder if
we could hear from someone with the administration, if they could
give some assurance that they would permit commission rates, I think
there is something to be said for top limits per head for sales figures,
but from a standpoint of the producer, when hog prices are down or
cattle prices are down, he would appreciate a little bit lower fee from
the commission house.





56


When prices are up he doesn't mind a little higher fee being charged.
Can we hear from someone from the administration?
Mr. POAGE. You can hear from them if they want to get into it.
The Chair has no objection to anyone offering a suggestion, but I
realize that nobody from the Department is here with any under-
standing of that.
Mr. FINDLEY. I did speak to Mr. Bierman about it.
Mr. POAGE. We would be glad to hear from him if he wants to make
a comment.
Mr. FINDLEY. I have heard informally that the administration is
(onsidering permitting a continuation of commission rates with a top
and bottom limit per head. That seems to me a very rational way to
proceed.
Mr. BIERMANi\. We had a number of court decisions which have said
that commission rates should be on a per head basis to be fair and
reasonable.
When we posted a couple of thousand auction markets about 15
or 20 years ago. many had percentage rates. We did not require that
they change those percentage rates. We are not at this time requiring
the change unless they are asking for an increase in rates.
Generally, under percentage rates when prices are going up there
is more income to the market, but there have been no requests on the
part of the markets that the rates be reduced.
However, when the price of the livestock goes down there have been
requests for an increase in the percentage rates. This has resulted in
a continuing upward pressure upon commissions.
We would like, of course, to see that all markets make an adequate
amount of money so that they can maintain good services and provide
adequate facilities to their areas.
But they can't do this with the fluctuation of the high and low
prices. So we are now taking the position that if a market is on a
percentage rate and it asks for an increase in rates because prices are
low, then it should convert to a per head rate.
This would be a rate that would provide it with sufficient income
to permit it to make money and provide the proper services.
Mr. FINDLEY. The problem is that if you wanted an increase in any
category then they have to drop their percentage rate in all categories.
Mr. BIEWRNAN. Ordinarily it's straight across the board. I believe
in this particular instance there was one category on a per head and
one on a percentage rate. Since your discussion with us, Mr. Findley,
we have been back in touch with them about that.
Mr. FINDLEY. Mr. Chairman. may I ask if other members of the
subcommittee have encountered similar complaints?
[No response.]
Mr. PoAGm. The committee will stand adjourned.
[W'hereupon, at 12:2 p.m., the committee adjourned.]












PACKERS AND STOCKYARDS ACT OF 1921,
AS AMENDED


THURSDAY, FEBRUARY 19, 1976
HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D.C.
The committee met at 10:10 a.m., pursuant to notice, in room 1301,
Longworth House Office Building, Hon. Thomas S. Foley (chairman)
presiding.
Present: Representatives Poage, de la Garza, Vigorito, Jones of
North Carolina, Jones of Tennessee, Melcher, Mathis, Bergland,
Bowen, Rose, Litton, Richmond, Nolan, Weaver, Baldus, Krebs,
Harkin, Hightower, Bedell, McHugh, English, Fithian, Thornton,
Wampler, Sebelius, Thone. Symms, Johnson, Peyser, Jeffords, Kelly,
Grassley, Hagedorn, and Moore.
Staff present: Fowler C. West, staff director; Robert M. Bor and
Hyde H. Murray, counsels; William A. Inhof and John E. Hogan,
associate counsels; L. T. Easley, press assistant; John Baize and
Alan Gray, staff consultants, Subcommittee on Livestock and Grains;
Jerry Jorgensen, staff consultant, Subcommittee on Department
Operations, Investigations and Oversight; Glenda Temple and
Susan Bell, staff assistants.
The CHAIRMAN. The next matter to come before the committee is
the bill H.R. 8410, to amend the Packers and Stockyards Act of 1921,
as amended, and for other purposes.
The Chair recognizes the gentleman from Texas, the chairman of
the Subcommittee on Livestock and Grains, Mr. Poage.
Mr. POAGE. Mr. Chairman, this bill attempts to do what we have
tried to do for a great many years and have never been able to come
to an agreement on. We think that we have basic agreement now.
Certainly there will be amendments offered this morning. I imagine
that some were expressed during the hearings in the subcommittee
and some will be new.
Frankly, I can see some items here that I believe are going to cause
trouble.
Basically what this bill does is to attempt to give some protection
to those who sell livestock to packers. Packers is defined in a broad
sense. These are not what we normally know as packers. They are
others who buy cattle which will ultimately go to the slaughterhouse.
The first thing it does is to provide for bonding. That is the basic
thing we have talked about for years. There have been those of us who
felt that packer bonding would incur more cost than benefits. Anyone
can make a logical argument on that.
(57)





58


Obviously there are only two places that the cost of bonding or
any of the other provisions could be paid. One of them is from the
producer and the other is from the consumer. There is not anybody
else who can pay it. It cannot be paid by the packer. It will be moved
depending upon the market.
At the present time the market for livestock is very weak. Obviously
the cost will fall on the producer.
When there is a strong demand for meat, obviously the cost will
be paid by the consumer.
I think we are kidding ourselves and trying to kid the public if
we assume that these costs are not going to be moved either backward
or forward. So whatever costs there are here we must recognize are
going to be paid at the present time by the producer. In a short market
they are going to be paid by the consumer.
The question that you must decide is whether the benefits are
greater than those costs. The subcommittee decided that the benefits
were greater than the costs and that the costs were not ohg,to be
rather small for the volume of meat that is handled.
One of the most unfortunate features of this is that the cost of
bonds for a large packer is going to be much smaller in proportion to
the amount of meat he handles than the cost for a small packer.
Smith and Company, Wilson and Company, and Armour and Com-
pany are not going to have to pay very much for a bond. Their credit
is pretty good.
However, the outfit that is killing relatively few cattle could have
to pay pretty high for a bond.
On the other hand, it is recognized that the chance of loss and the
chance that the seller takes when he sells to this relatively small and
relatively weak packer is much greater than it is when he sells to the
larger companies. That is one of the unfortunate things which we
cannot change by passing a law. The risk is greater and the bond
would require more.
The first section takes care of the bonding.
We have several sections here that are purely mechanical. They
deal with definitions. They simply change the mechanics.
The next provision seems to me to be the most helpful and the'
best provision of the bill in providing for prompt payment.
The CHAmnrMxN. Would you yield for a question.?
Mr. POAGE. Yes.
The CHAIbrMAN. The present vct, as I understand it, gives the Sec-
ertary authority to require bonding for dealers and market agencies.
Wlhat the subcommittee has done, then, is to give the Secretary addi-
tional authority to require bonding for packers. Am I correct?
Mr. POAW. Yes.
We have had that bonding for a good many years in regard to the
anet ion markets. Frankly, it has worked out very well.
We iised to suffer considerable loses on those auction markets. I do
n 't, know of anybody who has had any auction market losses recently.
Tler'e may have been some, but I am not personally familiar with
Tt 1'ns ,worlked very well. Tt has not added so much to the cost 9as o
,malie it imnpracti,1a to use the auction markets. They are still flourish-
it,,van d are providing a large part of the marketing service.





59


They are subject to the bonding provision. We simply extend the
bonding provision backward through the packing houses.
The ClAIMAN. I would like to ask one other question, if I may.
Does this bill provide that the actual requirements of bonding be
prescribed by the Secretary in regulations?
Mr. PoAGE. That is right.
Mr. MELOHER. Will the chairman yield on that point?
Mr. PAGE. Yes.
Mr. MELCMOR. What does the bond require in terms of day's kill?
Mr. PoAGE. We have not set out the requirements in the bond. We
simply have given the Secretary the authority to require such a bond.
What I was just about to get to is this: I think this is the most
important section of the bill. We have the prompt payment provision.
That provision requires that a packer, including all those defined
as packers, will make payment in cash unless there is a written agree-
ment to the contrary between the packer and the seller.
We do not believe that we have the authority to deny a man the
right to extend credit to a packinghouse if he wants to do so.
Personally, I have been pretty concerned about that because I had
thought that all that would happen would be that the packers would
come out. Whenever they would buy cattle, they would simply say,
"Before we do this, you will have to sign this agreement that we
will not pay for 10 days, 30 days," or whatever it may be.
I understand that we have tried that. We tried it in Texas. Okla-
homa, and Nebraska, I believe. All of them have substantially this
sort of provision which has been enacted by the State legislatures in
the last 18 months.
It is my understanding that the packers did start out with exactly
that procedure that I thought they would, but they met with consider-
able opposition. Within about a month they dropped it. There is no
practice of asking that the seller sign such a credit agreement.
Mr. GRASSLEY. Would the gentleman yield?
Mr. PAGE. Yes.
Mr. GR-_AsTEY. Was there any discussion with you or your subcom-
mittee and the Department of what direction they might be moving,
since there is no requirement in here about the size of the bond ?
Let me explain to you my concern. The State law in my State has
a minimum of a bond to cover 2 days' kill.
Would it be possible, in your judgment, that we might end up with
a weaker Federal bonding provision than some States now have?
Mr. POAGE. It. would be possible, but let me .o on just a moment
in connection with this prompt payment provision.
The bill does provide for payment in cash by the end of the business
day after the cattle are delivered.
Mr. MELCItER. By certified check?
Mr. POAGE. A check. It does not have to be certified. This can be
a check or a transfer of funds by telegraph or mail. It does not include
a draft. A draft would not be a payment because a draft is not a cash
payment. It is simply a commitment to make payment sometimfle in
the future.
We do provide that the payment has to be made by the close of busi-
ness the day after delivery.





60


This, I think, is substantially the same timing as Mr. Grassley's
State has and other States have.
There has been some feeling that we ought to make it at the time
of delivery. The problem there has been the physicial problem of the
way in which cattle are delivered.
I understand in Mr. Grassley's State that most of the cattle are
delivered to the packers' facilities and that the actual delivery takes
place there.
In my part of the country they are not delivered to the packers'
facilities. The packer takes them normally at an auction barn.
He takes them at a ranch or something of that type. They are delivered
a day or two later to the packer's grounds.
The question is then of making the payment. It is a physical problem
of how to do it. The packers say they cannot give a check because the
truck driver is usually not their agent but a common carrier. They
cannot let him write the check for them. There has to be some time
in which they can actually write the check.
I think we need to put in here that we would put the check in the
mail.
It has been called to my attention that the present draft allows
the use of drafts. I know that was discussed in the subcommittee. We
had, as I understood it, agreed that we would not allow the use of
drafts. Certainly we can take care of that with an amendment right
now.
Using drafts rather than checks to make payments has been one
of the things that has caused a great deal of trouble.
Mr. BERGLAND. Would the gentleman yield?
Mr. POAGE. Yes.
Mr. BERGLAND. Let me follow up on the point raised by Mr. Grassley.
The subcommittee did not stipulate what a reasonable bond might
be, but it was clearly my understanding that a two-day kill would be
construed as a reasonable bond by any standard. Certainly two days
would be within the realm of reason.
While I do not believe we ought to stipulate that in the bill itself,
perhaps it would clarify the matter if some language were inserted in
the committee report.
Mr. POAGE. The bill itself provides for payment in 2 days.
It seems to me that if you are going to require payment within 2
days, then certainly the bond would in all reason follow.
Mr. BERGLAND. I share the concern of the gentleman from Iowa.
If we are going to have a two-day payment provision, it would be
unreasonable to have a 12-hour bonding provision. That is my point.
The bonding requirement ought not to be less than the delivery pay-
ment required by law.
Mr. BEDELL. Will the gentleman yield?
Mr. PAGE. Yes.
Mr. BEDELL. Could we add that to the committee report?
The CHARMAN. The committee could do that, but I think the proper
way to proceed would be to first decide whether the committee is going
to adopt the bill before debating particular provisions.
If the gentleman from Texas would yield, I would like to say that
I personally think we ought to exercise some caution in establishing







the character of the bond. If we are going to give authority to the
Secretary to require bonding of packers, as the law presently requires
for auction markets and dealers, he should be allowed the equal flexi-
bility in formulating regulations in both cases.
Mr. MELCHER. A 2-day bond for a 2-day kill simply does not allow
an opportunity for the checks to clear.
If you deliver the cattle to the packinghouse and the packer mails
the check that day, then it would be impossible for that check to
clear. It would have to go, first of all, to the bank of the seller and
then to the bank of the packer in 2 days' time.
The bonding provision simply says that the bond will be great
enough to cover the packer and will not assure that that bond is great
,enough to cover the payment of the check when it is written on the
bank of the packinghouse.
I hope there is some other provision in the bill that guards against
the limitation of 2 days' bonding.
Mr. POAGE. There is what amounts to a lien. That is the next pro-
vision we should discuss.
I think this is the more controversial major provision of the three
provisions. I think this would be the most controversial.
In effect, this creates a lien. It holds the meat for which payment has
not been made. It creates a lien on that meat. You can call it a trust.
As I say, there is considerable question about the legal effect of
this.
It is following the laws of several of the larger producing States
that have enacted something of this nature.
Now there will be an amendment offered, as I understand it, to
change the language so that it will more nearly meet the legal tests
of what we already know about the law.
It creates an obligation to hold that meat so that the packer cannot
put a lien on it. He cannot use it as a part of his assets in borrowing
money as long as payment has not been made for the meat.
It gives the producer a threefold protection that he does not have
today. It gives him a bond. That bond is in the hands of the Secretary
to make it weaker or stronger. We do not attempt to write the details
of the bond. But it does authorize bonding.
It does make a provision for payment. I will leave it up to the
lawyers here because I know that the subcommittee contemplated that
we were not considering drafts as payment. The bill now is so written
that it does mention drafts, but it does not say that that is a form
of payment. I do not think it is legally a form of payment unless you
by law make it a form of payment.
Mr. KELLY. Does this bill contemplate that meat is to be covered by
the bill or does it cover only the sale of livestock?
Mr. POAGE. It covers only the sale of livestock. However, it keeps
a lien on the meat until it is paid for. That is my interpretation of it.
That is what I want to ask counsel. I wonder if they agree that that
is the correct interpretation.
Mr. BoR. Mr. Chairman, there are actually two separate aspects
to this bill.
Mr. POAGE. There are three.


79-314--76-5






62


Mr. BOR. One aspect of it is to provide protection to the livestock
producer when he sells the livestock to a packer.
As you indicated, there are three types of protection to livet
producers which apply under this bill. One is the bonding requirement.
The other is the prompt payment requirement. The final provision
relates to the imposition of a trust if the packer has failed to
payment to a livestock owner in a cash sale transaction and there
happens to be an insolvency. This last provision would provide pro-
tection to the livestock owner in that kind of a situation.
Separate and distinct from this, the definition of packer hag been
changed. It includes a category that was not previously included. This
category is a- person who buys and sells meat, meat food products, or
livestock products in unmanufactured form in interstate commerce.
The people who actually cut the meat were previously covered by
the definition of packer. For the first time this bill would add another
category. which is the jobbers and brokers of meat products.
The effect of including them in the bill is that it brings them within
the ambit of another section of the Packers and Stockyards Act, sec-
tion 202., which deals with unfair practices anid unjustly discrimina-
tory trade practices.
This would allow the Secretary to issue cease and desist orders to
these jobbers and dealers as well as others who are covered by the act
within the definition of the term "packer" and who engage in discrimi-
natory and unfair trade practices.
The Secretary could issue a cease and desist order. He would be able
to go to court to seek injunctive relief if the practices continued.
Also, it would oaive the persons adversely affected by the unfair prac-
tices recourse to the Federal courts. It would give them the opportunity
to seek redress in the Federal courts for the actual amount of damages
that they had suffered as a result of those practices.
Mr. KELLY. Does the lien or trust which is affixed to the meat go
beyond the initial purchaser?
In other words, if the slaughterhouse slaughters it and ships the
,neat out, does the trust go with the meat to the purchaser?
Mr. BOR. The person affected by the trust would be the packer and
the person who purchased the livestock. He would be holding in trust
any livestock that had not yet been killed, the meat products in inven-
tory and the receivables and proceeds that he might have derived from
the sale of the products. The person who purchased those meat prod-
ticts from the packer would not be affected by the trust.
The packer. however, would be holding in the trust the accounts
receivable that would be owed him from the person to whom he sold
the meat products.
MNfr. KELLY. This section 202 to whichyou made reference, does that
really have anything to do with the initial purpose of this bill-to try
to protect the producer in getting his money and avoid the Amein
Packers sequence?
Is that not an entirely different ball pame and subject matter and
has nothing to do with the farmer or rancher?
Mr. Bor. Directly speaking, it does not. As an indire matter it may
have an affect. sne
Mlr. KELLY. Is it going to affect his getting prompt payments?







I am getting one lawyer shaking his head in the negative.
Mr. BINoF. It would not affect whether or not the livestock pro-
ducer gets paid.
Mr. KELLY. That is another accomplishment and another subject.
I am not suggesting that it is good or bad. It is something entirely
different from the major thrust of the bill to protect the rancher.
Mr. BOR. That is correct.
Mr. KZLLY. What section of the bill is that to which you referred?
Mr. Boa. That is the section which redefines packer.
Mr. IMHOF. Section 2.
Mr. KELLY. If the bill is submitted as amended by going back to the
original definition of packer. the main effect would be to strike that
aspect of the bill. That would be the only effect.
If we maintain the same definition of packer, that would be the only
effect?
Mr. BOR. If you maintain the same definition of packer, you would
be removing the jobber and the broker from the provisions that I dis-
cussed earlier.
Mr. KELLY. With regard to section 20 2?
Mr. BOR. Yes.
Mr. KELLY. But. it would not in any way affect getting the. rancher
and the cattleman his money at the time of the sale of livestock.
Mr. BOR. That is correct.
Mr. IMHoF. There would be a question raised. If the packer were able
to get his money from the people at another level, this, of course, would
in turn affect the livestock producer. That would be the principal effect,
I believe, in terms of your question.
The packer has to be paid. He has to have an accounts receivable
that is worth something in order to protect the livestock producer. So
if you have some middlemen operating insolvent, obviously you would
have a problem there.
To the extent that you fail to cover the middlemen in this bill, you
might, to some extent, jeopardize the packers' accounts receivable,
which in turn might affect what is in this trust to protect the livestock
producers.
Mr. KELLY. Does section 202 protect that?
Mr. IMHoF. Section 201.
Section 2 of the bill amends the definition of packer in section 201
of the act.
Section 202 is a list of violations which can be committed by packers.
The CHA MAN. The time rests with Mr. Poage.
Mr. DE LA GARZA. Will the gentleman yield?
Mr. POAGE. Yes.
Mr. DE LA GARZA. I would like to ask counsel if this trust is identi-
fiable meat or volume of meat equal to that purchased.
Mr. BOR. It was not the intent of the provision to require that the
packer maintain custodial accounts separate for each livestock owner.
It was not the intent that he try to identify separately the livestock
which was purchased from each separate cattleman or livestock seller.
Rather, it was the intent that he would hold in a pool, so to speak,
his accounts receivable and his meat products in trust for the benefit
of all unpaid sellers.





634


In order to make it a little more clear that what we are talking
about is maintaining a trust account for all the unpaid sellers, we
have prepared some technical amendments. They may be on your desk
at the present time. V
Mr. THO'NE. Will the gentleman yield ?
Mr. POAGE. Yes.
Mr. THOrpE. We would also hope to make this point clear in the
report language, this point that Mr. de ia Garza just brought out.
The CHAI RAN. would ask Mr. Poage to yield to me.
Just so members might be aware of it. I understand an amendment
is going to be offered to the bill to eliminate the draft possibility.
Mr. Poage mentioned this earlier.
Speaking for myself alone, I have some serious reservations about
the trust provision.
I think we are already offering a greater protection to cattlemen
and stockmen in this bill than has ever been given before. Further-
more, I think much of it is very justified.
The main features provide for bonding requirement as well as for
prompt payment requirement while specifying the kind of payment
that may be issued. It gives authority to the Secretary of Agriculture
to issue cease and desist orders against packers for practices that
threaten the payment obligation, as well as to approach the Attorney
General to seek temporary restraining orders or injunctions in Fed-
eral courts. Finally, it expands the authoritV of individual injured
parties to seek damages in Federal court.
To additionallv impose a trust on either the product or the proceeds
of packers, I think, would create problems in many cases.
It is a standard financing procedure for the packers to seek credit
with the banks based on their accounts receivable.
I do not want to see the problems of packers, especially the small
ones, who already have difficulties in obtaining credit or reasonable
interest rates, multiplied by the imposition of such a provision. I do
not see any advantage in this for the livestock industry..
For that reason I personally intend to offer an amendment to elim-
inate the trust section.
Mr. TTIONE. Will the Ventleman yield?
Mr. PAGE. Yes.
Mr. THONE. I agree with everything that you said except your
ultimate conclusion on trying to eliminate the trust section.
I respect your judgment on it very, very much.
It is true that we do these things that you talk about. We put in
the bonding, the cease and desist, the injunctive relief, and whatever.
However, I think it is fair to point out to the committee that I
think we are doing the industry more of a favor when we put the
bonding section at the Federal level than we are doing the producer
a favor.
Twenty-six States or so have gotten into the bonding business and
proliferated it something terribly. It is most unwieldy.
So it is the industry now that we are helping.
I could go right on down the line.
On the prompt payment matters, which are proliferated all over
the place, there, is a considerable problem in administrating that
from State to State.




465


It comes down to the bottom line on this. For instance, there was
someone in my area who was hurt in the American Beef case initially
to the tune of approximately $900,000. We do not do anything for
him that he has not already had done at the State level.
The CAMMAN. Will the gentleman yield?
Mr. THoNE. Yes.
The CHAIRMAN. The bill has several different functions.
I agree there is a proliferation of bonding requirements. The bill
reported by the subcommittee would create a preemption in favor
of the departmental regulations on bonding. Only twenty-three States
have developed bonding requirements. This is hardly a majority.
Mr. THONE. Those are the 23 major producers.
The CHAIRMAN. Yes.
However, I want to point out that the bonding requirements run
against the packer. The combination of Federal and State require-
ments would be expanded actually in this bill by making all 50 States
subject to the bonding requirement.
Mr. TH oNE. Mr. Chairman, I know that time is of the essence, but
let me summarize what the Independent Bankers Association wrote
to all of us yesterday. In fact, I think they say it a lot better than I can.
"IBAA supports the concept of a trust arrangement and believe it
will prove beneficial to both producer and packer. The Association
does not agree, as some contend, that the trust measure will put the
packers out of business by cutting them off from their source of
funds; i.e., bank loans. In fact, we believe the fiduciary route would
enhance packers as a loan customer because this provision would
force them to keep more active records of such things as what is
owed, inventory, and accounts receivable."
So the Independent Bankers Association is coming down hard in
favor-
The CHAIRMAN. We just received a report from counsel that it was
not the intention of the subcommittee that this bill require a minute
following of all the specific items that were received. Yet, that is
just what the Independent Bankers Association, which does not rep-
resent the whole banking community on this issue, is saying would
be a desirable function of the one provision. So the two do not match.
Mr. THONE. They go further.
I will not read the entire thing. I think you have a copy.
The Independent Bankers do strongly favor this trust.
More important is this: My producers feel that if they do not have
this lien protection they will be in trouble. They have just gone
through months and months of sorting out assets that were left for
American Beef. Really we have not done anything for them in this
legislation.
So I would strongly oppose any deletion of section 8.
Mr. PEYSER. Let me ask something so that I understand.
The purpose and thrust of the bill is that if I were a small cattle
producer and you were a packer and I sell my cattle to you, then this
bill, if passed, would guarantee that there would be a bond. It would
say if the packer did not pay me within a certain amount of days,
whatever is decided upon, then I am guaranteed that payment.
Do I understand the bill correctly?





66


The CunAxAN. If the gentleman will yield, I would respond by
saying that I think we have to understand what a bond is. The bond
is not an insurance program which guarantees the seller a specific
amount of money in case he is not paid.
What bonding often does, as the gentleman from Montana has
pointed out, is to cover a part of the residual obligations that might
be incurred by an individual.
Bonding also tends to be a kind of watchdo since the bonding
companies do not want to be forced to resond to the bond. This
insures that certain practices are followed and that the solvency of
the purchaser is such that the bonding company wishes to maintain
the association on the bond.
Mr. PEYSER. Once again I am afraid I do not understand. The
Chairman is usually very clear in what he says.
Do you mean that this is not an insurance bonding at all?
I do not know of any bonding that is not an insurance program.
Again I am the cattle producer. I go to you as a packer. You as a
packer must have a bond, if this law were passed. That bond must
have been purchased from somebody, a bonding company, I assume.
The CHAIRMAN. Let me try to make myself clear. If I do not succeed,
perhaps counsel can help me.
The bond is written with respect to a fixed obligation. An insurance
policy might consider a lot of contingent liabilities and names a bene-
ficiary who would have claims against the insurance policy.
Mr. PEYSER. I am talking about bonding insurance.
The CHAIRM AN. Suppose the 2-day kill is set as a bond. It is possible
that you would have sellers who were not paid within 2 days. Under
the circumstances, the bond may be inadequate to offer a seller or a
total number of sellers in a 100 percent response.
A bond is probably not going to be an iron-clad insurance guarantee.
It puts the responsibility on a bonding company to respond in case of
failure to meet obligations.
One of the important factors of bonding is that it places the bond-
ing company in the position of being a watchdog for the operation.
Mr. PEYSER. I understand that.
Let's turn around a minute and suppose that I manufacture pencils.
I am a small pencil manufacturer. Let's suppose that I sell to a middle
man, a distributor or wholesaler, 100 gross of the pencils.
The wholesaler either goes bankrupt or does not pay me. The redress
I have as a pencil manufacturer, as I understand it, is that I go to
court and sue the individual or get whatever I can under bankruptcy
proceedings.
Does a cattle producer today, without this legislation, have the same
right that the pencil manufacturer has? Does be have the right to sue
the packer and go to court?
The CAIRMAN. Yes; he does.
Mr. PEYSER. Are we suggesting, then, that the pencil manufacturer
be under Federal legislation. Are we suggesting that we should estab-
lish a Federal bonding procedure to protect every small business or
major business in the country ?
Mr. THONE. Will the gentleman yield?
Mr. PEYSER. I do not have the time.






67


The CHAIRMAN. Although I have expressed my reservations con-
cerning the trust provision and intend to support the amendment to
delete it, I favor passage of this legislation. I do, however, want to
point out to those of you who do not believe that the measure goes far
enough that if this bill is enacted, even without the trust provision, it
will create a unique situation. For nowhere else in commerce are sellers
afforded as many special guarantees of payment, conditions, and re-
lated jurisdictional assistance from regulatory authorities as are cat-
tlemen and stockmen under this legislation.
As the gentleman points out, there is no assurance for a pencil man-
ufacturer that if he sells to another corporation he is going to be able
to insist on payment.
Yet, there will be very specific conditions in the Packers and Stock-
yards Act.
Though I have perhaps overstated the situation in saying that it is
"unparalleled" in the Uniform Commercial Code, this was not
intended.
I respectfully suggest, however, that we have gone overboard with
the lien provision; ,for even without the lien provision, I think the bill
will provide for the strongest Federal Government intervention in the
commerce of the United States to protect a certain class of sellers.
Mr. PEYSER. I agree with the Chairman on that issue.
I tell you very frankly that I will be amazed if this bill goes through
this committee and ever gets to the floor of the House.
I think you are moving the Federal Government into a massive pro-
gram that opens the door to a Federal guarantee.
I do not see any reason why commerce should be protected in every
aspect.
The CHAIRMAN. The Packers and Stockyards Act, which was orig-
inally passed in 1921, initiated some protections which this bill is
further expanding.
In addition, during the intervening half century, the Federal Gov-
ernment, through the Department of Agriculture, has set up certain
protections for control of the sale of livestock.
I am not in any way critical of this bill as a whole, but I did want to
emphasize that this is not something we usually do to protect small
business operations of any kind. Instead, it is a special kind of law
that relates only to packers and stockyards.
Mr. PoAGE. May I point out something further in connection with
that?.
A consent decree or a judgment was entered into in 1920 between
the U.S. Government and the then five big packers. One of them is no
longer in existence. The Packers and Stockyards Act was enacted as a
part of the whole transaction-the consent decree and the action by
the Congress. It put restrictions on the packers, restrictions that at
that time certainly did not fall upon many other people in business.
In turn the packers were limited as to what they could do.
It seems to me that that is the only excuse for an action that I
thought we could justify, although the subcommittee did not adopt it.
I thought we could justify requiring grocers who buy most of this meat
to make prompt payments, too. They get cash from the housewife when
they sell it.






68


As a practical matter, you cannot very well force packers to make
prompt payments and then deny them the opportunity to collect
promptly.
We have so tied the hands of the packers that it seems to me that
there is a justification for special action here that does not exist in a
good many other fields.
Mr. PEYSER. Does this then say that the small cattleman who per-
haps does not pay the person from whom he buys the feed for the
cattle is going to have to buy a bond? How about the cattle producer
himself having a bond to guarantee that the person who has sold him
the feed gets paid?
Mr. POAGE. That is the weakness of the whole thing.
The cattle producer and the feed man who he is buying from, who
is usually a farmer, do not have these restrictions on their actions.
They can talk with each other. They can talk with their neighbors.
They can sit back and decide that they will not buy.
However, if these packers discuss these things with each other,they
are in violation of the law and subject to great penalties.
Mr. PEYSER. We are talking about the major packers. You admit
this legislation would not affect them. The major packer does not have
a credit problem.
Mr. POAGE. I did not say that.
I think that the major packers may not have.the great problem, but
they have the same costs. They may not have quite as much cost be-
cause they have a better credit rating and may be able to get money
cheaper.
Obviously if Safeway does not pay its bills for 30 days or 20 days-
I understand it actually runs between three and four weeks-if they
do not pay their bills, obviously the major packers are going to have
to pay out a good deal of money to finance Safeway. The amount of
money Safeway owes to them at one time is a substantial amount.
The major packers have to pay it the same as the smaller packers. This
is in proportion to what they have sold.
I think that the restraints that we have on the packers are probably
what justifies the different treatment of the situation.
You are exactly right in saying that this is something that moves
toward more and more Government control. It is something that many
of us have been concerned about.
Many of us have thought that possibly this did not justify the cost.
I do not know now that it justifies that cost, but an overwhelming
majority thinks that it justifies the cost. I am willing to go along with
them to see if it does.
Mr. BEDELL. I think we are missing the whole point here, Mr.
Peyser.
I have been a small businessman. I think it is a unique situation.
Any small businessman recognizes as a part of his job in doing busi-
ness the necessity to check the credit of those people to whom he sells.
If it is a seed man or a feed man, it is part of his job. He has accss
to do it quite readily.
As I see the situation with the farmer raising livestock, he, first of
all, does not have the capability. Second, he does not have the in-
formation that he needs in order to check the credit of the various
producers, as is true in all businesses.





69


I think we have a unique situation here that does not exist generally
for business.
Mr. PEYSER. Are you suggesting that the packers who purchase this
do not have a credit rating that is published?
Mr. BEDELL. I am suggesting that I know of almost no farmer in
my area who could get the financial statement of American Beef Com-
pany and look at that financial statement and have any idea of what
the financial condition was of American Beef. That is about the only
way I know for him to try to check on the credit.
Mr. PEYSER. The same would be true with respect to many of the
major manufacturers who have gone broke in one way or another and
have taken small businesses with them. All of them have had access
to credit ratings. None of them have seen the disasters coming. Every
businessman, whether cattle producer or a small businessman, runs
into this.
I went out to the Montana Cattle Growers Association to meet for
3 days with them. They were astute businessmen.
Mr. BEDELL. There is no question about that.
However, if we have to build that expertise into every cattleman,
then we are going to make it tougher and tougher for the small fam-
ily farmer to continue to stay in business. I think in our society we
have a real obligation to try to do what we can to help keep that
small family farmer in operation.
Mr. PEYsER. I agree with that, but I do not agree with this
approach.
The CHAIRMAN. The gentleman from Texas, the chairman of the
subcommittee, yields back his time.
We know generally what is in the report of the subcommittee.
I recognize Mr. Melcher.
Mr. MELCUER. We should not lose track of how they transfer owner-
ship of these cattle. It is a bill of sale. The bill of sale is given by the
owner of the cattle on the basis that he is going to be paid.
We could say in the bill that the packer should pay by certified
check, which would clear everything, but we do not. It is cheaper for
the packer not to do that. We could say in the bill that the bond would
have to cover every check the packer writes, every outstanding check,
but we do not. It is cheaper for the packer not to require that large a
bond.
So what we have done is take the next step, which is easier for the
packer. We have said "OK, the bill of sale for the ownership of
that cattle can only pass when the previous owner, the cattleman, has
his money. We will put it in a trust arrangement." We do that simply
because it is cheaper for the packer.
The packer is benefitting from this arrangement, too.
As the bankers said, as Mr. Thone read, this will not hamper the
packer's credit. Where the packer benefits is that now we have identi-
fied under the act that the meat purveyors and the middleman are
also covered.
So the packer is going to have to hold that trust to make sure that
the original owner is paid for that bill of sale. In turn he is also going
to have the assurance from the purveyors and the other people to whom
he sells that he is going to get his money.


79-314 0-76----6





70


Mr. HARKIN. Where in the bill does it say that the purveyors and
retailers are going to have to make that prompt payment?
Mr. MELCHER. I read it in section 201 as amended.
Mr. HARKIN. What page?
Mr. MELCHER. On page 2, section 201, section 2 of the bill.
"Section 201. When used in this Act the term 'packer' means any
person engaged in the business of buying," et cetera. Then go down
to (c) : "Buying or otherwise acquiring or selling or otherwise market-
ing meats, meat food products or livestock products in unmanufactured
form."
Counsel, did I state that correctly?
Mr. BOR. Mr. Melcher, you are Correct in your reading of the revised
definition. But if you look at the specific section where it deals with
prompt payment, that section only applies to the purchase of live-
stock. In the print that you have on your desk, if you will look at page
10, you will see that it says, "Each packer, market agency, or dealer
purchasing livestock." The thrust of the provision is addressed only
to that situation.
Mr. MELCHER. Then the packer does not gain any added protection
as far as the purveyor is concerned in getting prompt payment?
Mr. BOR. He does gain in another sense. The purveyors and jobbers
are brought under the unfair trade practices provision of the bill.
That is section 202 of the Packers and Stockyards Act.
To the extent a packer is adversely affected by an unfair trade prac-
tice that is engaged in by a dealer to whom he sells his meat products,
he would be able to seek recourse with the Department of Agriculture
and with the Federal courts.
Mr. MELCHER. Then I stand corrected.
He does not have the advantage of the trust provision, but he gains
in this section in the bill in that the purveyors and the middle man
would come under the act and would be subject to the unfair practice
provision.
Mr. KELLY. Specifically, what portion of the bill provides for this
coverage of the purveyors?
Mr. IMHOF. On page 2 of the bill, revised definition of packers,
specifically in line 9. It includes in the definition of the term "packer":
"Any person engaged in the business of buying or otherwise acquiring
or selling or otherwise marketing meats, meat food products or live-
stock products in unmanufactured form."
Mr. KELLY. I am referring now to what provision in here provides
that they would be covered.
Mr. IMHOF. If they are defined as packers, they would be subject to
section 202 of the act. This defines unfair practices in which packers
are not permitted to deal.
So by virtue of being included in the definition of packer, they
would be subjected to the regulatory provision of the Act, specifically
section 202.
Mr. MELCHER. Mr. Chairman, I yield back the balance of my time.
The CHATRMAN. The gentleman from Colorado. Mr. Johnson.
Mr. JOHNSON. This is not clear to me.
To whom does the bonding protection go? Is there pro-rata dis-
tribution of the bonding protection among all of the producers and
creditors or is it limited?







I understand we are talking about the two-day kill. Does that pro-
tection apply specifically to people who have provided cattle in a two-
day period or is it prorated generally?
Mr. POAGE. Will the gentleman yield?
We would expect it to go to those within the two-day kill only.
Mr. BOR. Mr. Chairman, I think what normally happens is that the
two-day kill is a means of determining what the dollar coverage of
the bond would be. You would determine the average two-clay kill for
a particular packer.
Let's assume it comes to $500,000 worth of livestock. His bond then
would be in the amount of $500,000. That bond would be available to
protect any livestock owner who was unpaid.
Mr. JOHNSON. What if you have a million dollars worth of unpaid
debts? Does it apply pro rata?
Mr. THONE. Pro rata.
Mr. POAGE. You cannot have a million dollars of unpaid debts. You
can have them, of course, but you cannot exceed your normal two-
day kill because the packer has to pay.
Mr. JOHNSON. But what if he does not? If they do as they are sup-
posed to-
The CHAIRMAN. It would be possible to imagine more obligation
than that simply because the bill also allows livestock producers to
extend the time for payment beyond the two-day prompt payment
requirement. However, the bonding is not a complete and absolute
guarantee to the livestock producer that there is a fixed amount of
money waiting there in the bonding company for a 100-percent pay-
ment.
This is a requirement which is over and above the standard require-
ment in normal trading relationships between buyers and sellers. It
is an additional protection in two ways: Both in the real resources
which are available in case of failure and in terms of the bonding
company's own concern and involvement.
Mr. JOHNSON. The question still has not been answered.
Mr. POAGE. This gives the same authority to the Secretary that he
has exercised in regard to auction sales.
We used to hear about a good many losses at auction sales. I have
not heard of one loss at auction sales in the last 2 or 3 years. There
may have been some. I am not trying to say that there have been none
in the United States, but certainly there have been no substantial
losses at the auction sales.
This gives the Secretary of Agriculture the same authority in con-
nection with the packers that he is now exercising in regard to the
auction rings. I think it has worked well. I think experience has
proved it has worked well. I know that there is a lot of prejudice
against the Secretary of Agriculture, but I am willing to let him work
this as he has worked it in the auction sales. I think he will.
I think the best way of guessing what the future holds is to look
and see what the past has given us under the same circumstances. The
past has given us real good protection.
Mr. JOHNSON. I am not arguing that. It seems to me it ought to be
clarified in the bill because there is always the possibility when you
have a 2-day hiatus for an operation to go 3, 4, 5, or 6 days before
anybody is really aware.





72


It seems to me that if the bond is only going to cover 2 days, then
we ought to make it clear as to whom is protected. A fair way would
be to have it prorated. However, that is up- to the committee.
The CHAMMAN. The only point I am trying to make is this:
Much of the concern expressed around the country among cattlemen
and stockmen was heightened and exacerbated by the experience of
the major bankruptcy of the American Beef Processing Co.
I am very sympathetic to the problems that were revealed in that
incident; but we will make a mistake, in my judgment, if we think
that we can, by any series of exacting requirements, present some abso-
lute Government-guaranteed system under which it is impossible
for any packer to be bankrupt or for any stockman to be caught in
that bankruptcy.
If what we are really seeking is a 100-percent guarantee, we would
be far wiser to make a provision in the law that the United States
will guarantee the payment. The best way to truly insure that the
unfortunate situation will not recur is to pledge the full faith and
credit of the U.S. Government.
Yet, it can be argued that the United States itself does not always
come out of bankruptcies with all of its obligations paid.
In striving for 100-percent protection, we are going to get a bill so
difficult that I am afraid it will never achieve its purpose.
Mr. JOHNSON. I have been involved in enough lawsuits.
Who gets the claim against the bonding? Is it for 2 days or prorated
among those who have supplied for the last 4 or 5 days?
It seems to me that we can make that very clear. Do we want to
protect all those unpaid creditors within the bonding limitation or
do you pay them pro rata? Otherwise, you are going to have court
battles.
The CHAIRMAN. I think that is the intention, but let me ask counsel.
Mr. BOR. The purpose of this was not to protect only those who
sold livestock within a two-day period. It is to protect any unpaid
seller. The two-day kill provision was an index to tell how much
dollar coverage should be involved in the bond. Any unpaid seller
would have the benefit of the bond.
What normally would happen would be this: If you have an in-
solvency situation, then the unpaid sellers would join together in a
suit against the bonding company and would be paid pro rata by the
bonding company.
The CHAIRMAN. Mr. de la Garza?
Mr. DE LA GARZA. This American Meat Processing Co., or whatever
the name was, not being on the subcommittee and not having access
to the subcommittee hearings, would somebody tell me who they are
and where they are from? I would like to know what happened and
who took what. I would like to have the story.
The CHAIRMAN. The gentleman does not have enough time in his
5 minutes to obtain that information.
Mr. DE LA GARZA. Apparently we are going to mess up the whole
act to correct something about that company's bankruptcy.
Mr. THONE. Will the gentleman yield?
Mr. DE LA GARZA. We ought to have it on the record as to why we are
taking this approach.







Mr. THONE. Very briefly, American Beef is located in Omaha, Nebr.
Mr. DE LA GARZA. I would suspect that.
Mr. THONE. Well, there are some big ones in Texas, too.
We are not addressing ourselves just to the American Beef case.
Mr. DE LA GARZA. That is all I have heard here.
Mr.% THONE. There have been 167 packer bankruptcies in the last
15 years. There have been seven or eight in the last year or so.
In addition, the Packers and Stockyards administrators-and you
have got some good ones down there in Marvin McLain and Glen
Brerman-readily conceded and testified before us that they have
got a paper tiger down there.
That is what we are trying to do here. We are trying to strengthen
an act that obviously needs some strengthening badly.
It is much broader than just American Beef.
The CHAIRMAN. Mr. de la Garza, I think the record will show that
when I mentioned the magic words American Beef Processors, I also
mentioned the situation in which it was involved exacerbated concern
about this problem, since it was a very dramatic insolvency in which
a large number of people were affected.
Mr. THONE. $20 million.
Mr. DE LA GARZA. That is the only one that had been prominently
mentioned.
The CHAIRMAN. Mr. Wampler?
Mr. WAMPLER. If I could inquire of the distinguished gentleman
from Texas:
In the course of the subcommittee hearings did you address your-
self to the situation where a seller of livestock delivers a bill of sale
to a buyer on which there was a lien existing at the time of sale?
Then if the seller took the proceeds from the sale and did not satisfy
the lien, what protection would the packer have if the holder of the
lien in turn moved against him for payment, meaning that the packer
would have to pay twice for the same thing?
Mr. POAGE. We did not go into that. It was mentioned in the proceed-
ings of the subcommittee. We did not attempt to give the packer this
kind of protection.
Mr. Melcher feels that this is for packers only, but we left the
packers at the mercy of State law in that respect. Of course, every
State does have legislation in that regard. We left the packers right
where they are as far as buying livestock that already had a lien
on it.
They do suffer some losses as a result of that.
Our registration system in most States is such that it does not
provide any real protection. It gives us no practical way in which the
buyer of that livestock can know where there is a lien.
I understand you can go to the courthouse and run down the mort-
gages. At the same time. There is no practical protection.
There is State law. We did not change that in the least.
We recognize that packers do have to take some risks.
I do want to suggest that we did not try to write a packer law. We
tried to protect producers from as much unnecessary expense as we
could. We are thoroughly convinced-or at least let me say that I am
thoroughly convinced-that either the producer or the consumer will
have to pay for all of the extra costs which we impose here.





74


We are not going to be able to add these costs and require packers
to absorb them. In the first place, they can pass them one way or the
other to the producer or to the consumer. They are going to pass them
on one way or the other.
We were really concerned that we were going to get these expenses
out of line with the amount of good that we are going to d6 with
this bill.
I think that we are putting maximum protection in the bill. We
may have put so much that it has already cost us an unreasonable
amount.
I think the chairman pressed that point. We discussed it in the
subcommittee. I pointed out that we had already given enough pro-
tection in the first two: The bonding and the prompt payment
provisions.
Of course, as you approach perfection and that 100 percent guar-
antee, your costs go up very rapidly-much more rapidly. You can
take care of 98 percent of the losses more cheaply than you can take
care of the last 2 percent.
If we are going to try to make this a 100-percent guarantee, then
the chairman is exactly right. You will have to have the Treasury
guarantee it in the first place and cut out all of this other expense.
Mr. WAPLER. Would it be overly burdensome or unreasonable to
require the seller of livestock at the time he issues the bill of sale to
have an accompanying document stating that there is, in fact, a lien
on it and say who holds it? Would that be burdensome?
Mr. POAGE. I do not see putting that in the law. If anybody wants
to require it now, he can.
I do not think that the processors have felt that the losses were great
enough to justify it.
Irritation-not so much the direct expense, but irritation-changes
into expense somewhere down the line. I do not think that they have
felt that the benefits they would receive would be great enough to
pay for that irritation.
They could require it now. You can require a certificate from the
seller if you want to.
Mr. WA'MPLER. I think you have answered my question.
It does seem to me to be a problem, but perhaps not of sufficient
magnitude.
As you well know, the very nature of the livestock industry is that
frequently livestock is sold in other States. I was simply concerned
about this.
Mr. POAGE. They are more often sold outside of the county where
the lien is recorded than in the county where it is recorded.
Mr. WAXPLER. I thank you for answering that question.
Mr. THONE. I was just going to respond to Chairman Poage.
I do not think section 8 really would add much cost to the adminis-
tration of this bill. I do not see the so-called lien section and trust
section adding much cost.
Mr. PoAcn. It does not add much cost to the Government, but it adds
cost to the processor.
Mr. THONE. Not as I envision the implementation of that section.
Mr. POAGE. It adds cost. It impairs your ability to borrow money
and that adds cost.







Mr. THONE. I would concede that it will in some instances reduce
the availability of cerdit to some of the packers. I will concede that.
The CHAIRMAN. I recognize Mr. Richmond.
Mr. RICHMOND. I understand that enforcement of section 206 would
cause any number of independent packers to go out of business.
Mr. THONE. Why, Mr. Richmond?
Mr. RICHMOND. Because of their inability to borrow money during
that week that they have given the farmers lien on the cattle.
Mr. THONE. Aren't you implying, Mr. Richmond, that these are
probably pretty shaky packers? Those are the very packers from whom
we think our producers need protection.
Mr. RICHMOND. In two other sections of the bill those farmers are
protected from the shaky packers. No. 1 is the bonding factor. No
bonding company is going to bond a shaky packer for even 2 days.
Second: 'We have the fact that we give the Secretary and the Pack-
ers and Stockyards Administrator the right to have periodic checks
on all packers.
Mr. THONE. I know who told you, too. They were in my office.
Mr. RICHMOND. On the other hand, I am interested in keeping people
in business, not out of business.
Of course, I am more interested in the independent meatpackers
because that means more people in the business and more competition
and lower prices for the consumer.
It seems to me very valid that, first of all, the Secretary has the
right to demand balance sheets, property loss statements, and financial
information any time he wants to do so.
Second, the Stockyards Administrator can look into any supposedly
shaky independent packer.
Third: No bonding company will give an independent packer a
2-day bond if there is any question about whether or not he is shaky.
I do not know why we should enact legislation here that is going
to automatically force several dozen packers out of business.
Mr. THONE. Let me quickly say this: It just seems to me pat-
ently unfair that the Chase-Manhattan Bank-and those are the folks
who saw me and they checked with Congressman Peyser also-wants
as collateral the livestock from our producers for which the packers
have not paid.
I just cannot get that through my thick head.
Why do they have to have that as collateral? It just is not fair.
Mr. RICHMOND. Obviously, Mr. Thone, under such things as ac-
counts receivable financing or inventory financing, any bank and any
commercial institution would take a lien on the accounts receivable
and inventory of that institution which they finance.
I do not think we want to put independent packers out of business.
Mr. PEYSER. I have had absolutely no communication with the
Chase-Manhattan Bank. I did not know they were even involved.
I wonder about the testimony that went into the creation of this bill.
Have we had any testimony as to the cost of the bonding? Have
any bonding companies given us an estimate?
Mr. RICHMOND. My understanding is that the cost of the bonding
which is specified in the bill now will cost the industry an additional
$1,900,000 a year, which I do not consider excessive.





76


Mr. PEYSER. All right, $1.9 million is an estimate. Obviously that
is going to be paid by the consumer. There is no question about that.
Mr. RICHMOND. Yes.
Mr. PEYSER. I think the chairman himself indicated that either the
producer or the consumer is going to pay one way or the other. I
agree completely.
What is the normal pay time now that a packer has in dealing with
a producer? What is the usual understanding among creditable busi-
ness operations today? Is it 2 days? Is it cash on the barrel head?
The CHAIRMAN. The regulations under the Packers and Stockyards
Act currently call for payment on the day following the day of the
transaction. The problem arises from the fact that this has not been
enforced with any regularity.
This bill would put into statutory law a requirement that those
payments be made subject to the opportunity of the seller to make
financial arrangements with a purchaser for up to 10 days while still
treating it as a cash transaction.
Mr. PEYSER. That is my understanding.
It is totally impractical under existing law, which is why it has
never been enforced.
Obviously the people have gone ahead on a system of doing it within
a 10-day period.
Why then should we legislate 2-day payment and back it up by
saying bonding is necessary?
This is going to have a cost. I think it would drive the indepeiid-
ents out.
The gentleman from New York was making this point. Even the
legitimate independents, the good ones, are going to be driven out.
We are promoting the big packers to come in and take them over
because they are the ones who can get the credit.
I think the gentleman from New York is correct.
Mr. R ICHMOND. Mr. Peyser, I feel that the 2-day bond and the $1.9
million cost to the multimillion dollar industry will not in any dila-
tory way affect the consumer. The added protection is felt by the con-
sumer as well, in the form of increased market stability.
I would be against the invocation of costs to section 206, which
continues that to 7 to 10 days.
I certainly think that if we give the Secretary of Agriculture and
his Packers and Stockyards Administrator the right to look into every
packer's figures, then we are giving the farmer as much protection
as we consumers can afford to give him and still keep the independ-
ent packer in business.
Mr. ENGLISH. Mr. Peyser made a good point in his argument for
the lien provision which is in the act.
The simple fact is that this provision on the prompt payment has
not been enforced. The lien provides extra protection.
The second thing is this: Instead of paying in cash, which I think
would make us all very happy and make the farmers very happy, the
lien is what the packer is paying for the convenience. It is a con-
venience to him to delay the payment.
If he paid the seller on the spot with a cashier's check or some-
thing else, then there is no problem. There is no penalty as far as the
lien is concerned. He has no difficulty there.







Mr. RICHMOND. It would put independent packers out of business,
which I do not want to see happen.
Mr. ENGLISHt. All they have to do is to pay cash. Then they do
not have to worry about any inconvenience.
The problem you are getting into is that they are paying for the
convenience of being able to delay payment.
If the small independent you are talking about does not want to
mess with the lien, then he can pay cash. Then he is home free and
everybody is happy.
The CHAIRMAN. I recognize Mr. Thornton.
Mr. THORNTON. Thank you, Mr. Chairman.
I find myself in the position of changing an attitude expressed in
the subcommittee during the discussion of section 206 with the pro-
vision relating to the imposition of a trust.
In subcommittee I supported that because it seemed to me to be a
fair statement of what the law ought to be in a payment situation
such as had been described. I still think it is basically a fair rule.
It was a fair rule. This is indicated by the fact that the Circuit
Court of Appeals for the Fifth Circuit of Texas ruled that it was fair.
This was in the case in re San'uels & Co., Inc.
On appeal the Supreme Court reversed that case saying that there
was no mandatory, uniform national law imposing a trust relation-
ship in this situation.
It remanded it to the fifth circuit. Three judges on the fifth circuit
made a determination that under the common law and under the
uniform commercial code and other applicable codes in Texas a fidu-
ciary relationship existed and the seller would be paid.
I think that this may be the preferred rule under uniform commer-
cial code decisions around the country.
I do not think that it is a matter in which the Congress should now
preempt local law and establish a rule which would be national in
scope to determine the rights of buyers and sellers rather than leav-
ing the question to the laws of the separate jurisdictions. This is par-
ticularly the situation so long as the legal questions have riot been
finally resolved.
So I will support your motion to eliminate the trust provision from
the bill.
The CHAIRMAN\. The Chair would like to say that it appears unlikely
that we will finish consideration of this bill within the time remaining
since we still have a number of controversial topics to discuss.
How many members could not be present tomorrow at 10 o'clock?
It appears that we will not get a quorum, so the Chair will have to
reschedule the bill at a later time for further markup.
We have a tight schedule -and there is some pressing business before
the committee which has already been scheduled.
Iodo consider this bill a priority item within the committee's calen-
dar and intend to give it full consideration within the limitations im-
posed by other bills.
I recognize Mr. Grassley.
Mr. GRASSLEY. I have a question of Mr. Poage or of counsel.
On page 10 there are three sentences. The first sentence and the last
sentence have reference to "each packer, market agency, or dealer."
The second sentence leaves out the word "packer."





78


What is the reason for leaving out the word "packer" in the second
sentence on page 10 ?
Mr. IHOF. Mr. Grassley, if I understand your question, the second
sentence refers to purchaser. That would be the packer.
Mr. GRASSLEY. On page 10 the second sentence says, "Any such
agreement shall be disclosed in the records of any market agency or
dealer."
Why is the word "packer" left out there as opposed to it being in-
cluded on lines 1 and 2, as they are numbered there ?
Mr. IMHOF. It was intended to be covered in the following words
which are "in the purchaser's records." The packer was understood to
be the purchaser.
Mr. GRASSLEY. So it should be left out?
Mr. IMHOF. I believe packers are covered by that phrase, yes.
Mr. GIAssLEY. I have a further question of Mr. Poage.
In regard to the prompt payment, how did you take into considera-
tion the problem of check flow ? That is a major problem.
The farmer receives a check, which is the payment as defined in
your bill. But the fact is it takes a long time to clear the checks with
the packer's bank, which is the final determination of whether or not
payment is really being made, in my estimation.
Then there is the fact that sometimes that has been used as a subter-
fuge to avoid payment or at least to provide ,a lot of interest free
money for the packer.
Also, that question relates.
Mr. POAGE. Let me answer one at a time.
Mr. GRASSLEY. Included with it, however, is that it says on line 4,
"Extending the normal period of payment" is an unfair practice.
Is that the answer to my question? If so, there is not enough defini-
tion in the bill of extending the normal period of payment.
Mr. HIGITTOWER. Mr. Grassley, we will offer an amendment at the
proper time revising this section 409.
You referred to the problem of the float. We will provide that pay-
ment should be made by check or wire transfer of funds.
One of the main abuses of the float was on the draft.
You see, there is a difference in actual conveyance of title with a
check and a draft.
So we propose in an amendment to this section to provide that pay-
ment would have to be made the following day by check or wire trans-
fer of funds. That does address itself to the problem of the float. That
is where the principal abuse was.
I am not quite sure about your other question.
Mr. GRASSLEY. On line 4, "Extending the normal period of pay-
ment" is defined as an "unfair practice." My question is about that.
Mr. HIGHTOWER. We completely rewrite that section and eliminate
that language.
Mr. GRASSLEY. In a sense then your amendment is a way of guaran-
teeing that the farmer will have cash in hand confirmed within 24
hours?
Mr. HTGTTOWER. Also, in the amendment we are providing grade-
yield sales by spelling that out. You can sell cash on the barreled
or you can sell grade and yield. This does extend.





79


But if the producer-seller chooses to use that method of selling,
then it does give more time to the packer. It is his choice.
Mr. GRASSLEY. Thank you very much.
The CHAIRMAN. Mr. Baldus?
Mr. BALDUS. The bonding provision is what we are getting around
to.
In the explanation it says in section 1, but I do not find it there.
What I am interested in is the flexibility. Sometimes 2 days may be
adequate.
On the other hand, if the department has flexibility and if a com-
pany were to require more time, I wonder if it is there.
I do not find language in the bill that requires bonding. So I cannot
determine that point.
Mr. POAGE. We changed the definition. It strikes out "marketing
agency." It is "As defined in title III of the act, every packer as
defined in title II of the act."
Mr. BALDUS. Without going through this, I would like to ask counsel
this:
In this section is there adequate flexibility for the department to
respond to the packers who maybe have expanded rapidly? Can they
be flexible in the amount of bonding they require?
Mr. IMHOF. It is left to the discretion of the Secretary of Agricul-
ture, who has delegated that to the Administrator of the Packers and
Stockyards Administration.
Mr. BALDUS. Could we assume that there are any special cases under
consideration? Is there any practice
Mr. IMHOF. They invite all comments from all interested parties
before they would promulgate any regulation governing a subject
like that.
Mr. BALDUS. Thank you.
Is there a list of people who appeared for or against or neither for
or against but for information on this bill before the subcommittee?
Mr. IMHOF. We have a printed record of the hearing.
The CHAIRMAN. The answer to the question is yes. The printed
hearing contains the actual testimony of all who appeared or sub-
mitted statements for the record. The index of the hearing contains a
list of all those who appeared.
Mr. MURRAY. Also the subcommittee staff prepared a list of the
organizations as to how they came out for or against each of the key
provisions which are in the subcommittee print, which is sort of a
summary.
The CHAIRMAN. If there are no other questions at this juncture, the
committee will stand adjourned.
We will be meeting Tuesday next at 10 o'clock for resumption of
the markup of the grain standards bill. The continuation of the
markup on this legislation will be scheduled by the Chair at an ap-
propriate time.
The meeting will stand adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]












PACKERS AND STOCKYARDS ACT OF 1921,
AS AMENDED.


TUESDAY, MARCH 30, 1976
HoUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D.C.
The committee met, pursuant to notice, in room 1301, Longworth
House Office Building at 10:10 a.m., Hon. Thomas S. Foley (chair-
man) presiding.
Present: Representatives Poage, de la Garza, Vigorito, Jones of
Tennessee, Melcher, Bergland, Rose, Breckinridge, Richmond, Nolan,
Weaver, Baldus, Krebs, Harkin. Hightower, Bedell, Fithian,
D'Amours, Wampler, Sebelius, Findley, Thone, Symms, Johnson,
Madigan, Heckler. Kelly, Grassley, Hagedorn, and Moore.
Staff present: Robert M. Bor, counsel; William A. Imhof and
John E. Hogan, associate counsels; John M. Lindley, staff assistant;
John Baize and Alan Gray. staff consultants, Subcommittee on Live-
stock and Grains; Weldon Barton and Leon Geyer, staff consultants,
Subcommittee on Domestic Marketing and Consumer Relations;
James Culver, staff consultant, Subcommittee on Dairy and Poultry;
Charlotte Farwell. staff consultant. Subcommittee on Tobacco; Jerry
Jorgensen, staff consultant, Subcommittee on Department Operations,
Investigations and Oversight; Glenda Temple and Susan Bell, staff
assistants.
The CHAIRMAN. The Committee on Agriculture will come to order.
The committee meets this morning for consideration of the bill H.R.
8410, to amend the Packers and Stockyards Act of 1921, as amended,
and for other purposes.
[The bill, H.R. 8410, with suggested changes arrived at in previous
meetings, follows :]
(81)






82


94mn CONGRE SS
1ST SESSION .84.
Ho Ro 841-0


7
I)


IN THE HOUSE OF REPRESENTATIVES
JULY 8,1975
Mr. TIjONE (for himself and Mr. BERGLAND) introduced the following bill;
which was referred to the Committee on Agriculture

.. I-


I A BILL
amend the Packers and Stockyards Act of 1921, as amended,
and for other purposes.

Be it enacted by the Senate and House of Representa-

tives of the United States of America in Congress assembled,

That the proviso in the paragraph designated "Packers and

Stockyards Act," under the heading "MARKETING

SERVICE," in the Act of July 12, 1943 (57 Stat. 422; 7

U.S.C. 204), is amended by striking out "market agency

and dealer" and inserting in lieu thereof "market agency (as

defined in title, III of the Act), every packer (as defined in

titleI of the Act) in connection with its livestock ptircla:.-

ing Ol)eratiolS, and every other person operatiiig as a dealer

(as defined in title III of the Act)".
I


To

1.

2

3

4

5

6

7

8

9

10

11





83


2
1 SEc. 2. Section 201 of said Packers and Stockyards Act

2 (7 U.S.C. 191) is amended to read:
3 "SEC. 201. When used in this Act the term 'packer'
4 means any person engaged in the business (a) of buying or
5 otherwise acquiring in commerce livestock 1-0Y.4,.,Y for
'6 purposes of slaughter, or (b) of manufacturing, processing,
7 or preparing in any manner iea nat food productis-,-
8 poid ..l.y p. for sale or shipment in commerce,
9 or (c) of buying or otherwise acquiring or selling or other-
Cor).
10 wise marketing meats, meat food produce -ivestock products
11 in manufactured form, o-,--r-, or ou.t ...u... in
12 'commerce, on a commission basis or otherwise, either on his

13' own account or as the employee or agent of the vendor or
14 purchaser: Provided, however, That nothing in this section
15 shall affect the jurisdiction of tei Federal Trade Commission
16 with respect to retail sales of meat, meat food products, live-
17 stock products in unmanufactured form, or poultry prodtict
18 ais provided in section 406 of this Act.".

19 SEC. ). Sections 202 and 312 (a) of said Packers and
20 Stockyards Act (7 U.S.C. 192 and 213 (a) ) are amended
21 by deleting the phrase "in commerce" wherever it appears
22 in said sections, and by deleting fhe commas immediately
23 before and following the phrase "in commerce" in sections

2A 202 (b) and 312(a) of said Act (7 U.S.C. 192 (1)) and
25 213 (a)).





84


3
.1 SEc. 4. That the i)roNvi.o in the paragraph designated

2 "Packers and Stockyards Act" under the heading "MAR-
3 ICETVING SERAAIC, ini the Act of July 12, 1943 (57
4 Stat. 422; 7 U.S.C. 204), is further amended by adding at
5 fie end thereof a new sentence as follows: "If the Secretary
6 finds any packer is insolvent, lie may after notice and hearing

7 issue an order under the provisions of section 203 requiring
8 such packer to cease and desist from purchasing livestock -o
9 p while insolvent, or while insolvent except under such
10 conditions as the Secretary may prescribe to effectuate the

11 purposes of the Act.".
12 SEC. 5. Said Packers and Stockyards Act is further
13 amnended by redesignating section 408 as section 411 and

14 by adding to the Act a new section 408 to read as follows:
15 "SEC. 408. Whenever the Secretary has reason to be-
16 lieve that any person subject to this Act, (a) with respect
17 to any transaction subject to the Act, has failed to pay or
18 is unale lo pay for livestock, ineat, neat food products, or

19 livestock products in unnmnifactured form, ,il ryo-. paid-
20 U .t""1,. or has failed to remit to the Person entitled
21 thereto the net proceeds from the sale of any such corn-
22 moditv sold on a commission basis; or (b) has operated
.otherwise
23 while insolvent, or in violation of the Act in a manner which

24 may resomably be expected to cause irrepar)lfle damage to
25 another persol; or (e) does not have the required bond,





85


4

1 and that it would be in the public interest to enjoin such

2 person from operating subject to this Act or enjoin him
3 from operating subject to this Act except under such con-

4 ditions as would protect vendors or consignors of such com-
5 moditics or other affected persons, 'until complaint under

6 this Act is issued and dismissed by the Secretary or until
7 order to cease and desist made thereon by the Secretary has
8 become final and effective within the meaning of this Act
9 or is set aside on appellate review of the Secretary's order,

10 the Secretary may notify the Attorney General, who may

11 apply to the United States district court for the district in

12 which such person has his principal place of business or in
13 which. he resides for a temporary injinmction or restraining
14 order. When needed to effectuate the purposes of this section,
15 the court shall, upon a proper showing, issue a temporary

16 injunction or restraining order, without bond. Attorneys ema-
17 ployed by the Secretary of Agriculture may, with the ap-

18 Proval of the Attorney General, appear in the United States
19 district court representing the Secrietary in any action seek-

20 ing such temporary restraining order or injunction.".

21 SEC. 6. Subsection 308 (a) of said Packers and Stock-
22 yards Act (7 U.S.C. 209 (a) ) is amended to read:
other tha 1rov
23 "(a) If any person s1Ijec -o anly o tic provision-, of

24 this Act violates, .i..t, e oct to mnat er. relating, t4 I;~.-
25 .to-.. or 41141'11, any of the provisions of this Act or of ,lny


79-314 0 76 7





86


5
1 order of the Secretary made under this Act, lie shall be
2 liable to the person or persuis injured thereby for the full
3 amount of damages sustained ill consequence of such viola-
4 tion.".


6 7 U.S.C. 210) is amended as follows:
7(a,) By changing the first sentence in. subsection a) to
8 read: ny person complaining of anything done omitted

9 to be don, With respect to matters relating to ivestock or
10 poultry, by y person subject to this Act (hereinafter in

11 this section refer 'ed to as the 'defendant') n violation of any
12 of the provisions o this Act or of an rder of the Secretary
13 made under this Act, ay, at any ine within one hundred

11 and twenty days after e ca e of action accrues, apply
15 to the Secretary by comply t which shall briefly state the
16 facts, whereupon if the ecre ry has reasonable grounds
17 for believing that th endat s violated the Act or an
18 order of the Secre ry made under e Act, a copy of the
19 complaint thus mdc shall be forward by the Secretary
20 to the defen ant, who shall be* called up to satisfy the
21 complain, or to answer it in writing, within a reasonable
22 time t be specified by the Secretary.";
23 (b) By substitutmg a colon for the period at le Cld
24 f subsection (e) and adding thereafter the following \o-
2 viso: Proviled, That in complaint wherein tie amoui





87


6


2 or I hearing need not be held and proof in. support of ie
3 conm, int and in support of the defendant's answer in:m be
4 supplies in the form of depositions or verified statei ents of

5 fact unle- the Secrelary directs that an oral arig be

,6 held."; and
'7 (c) By a ding at the end of said secti i the following
8 subsections:
9 "(g) Any par adversely affecte. y the entry by the

10 Secretary of an oider granting or d nying reparation may,
11 within thirty days from id after ie date of such order, ap-
12 peal therefrom to the distr I c urt of the United States for

13 the district in which the hear* w" m as held: Prozuided, That in
14 cases handled without or, heal** o in accordance with sub-
15 section (e) or in whi- gi oral hea ng has been waived by
16 agreement of the par ies, appeal be to the district court
17 of the United Sta s for the district ii hich any defendant

18 is located. Suel appeal shall be perfected ')y the filing with

19 the clerk of id court of a notice of appeal, together wIth a
20 petition in uplicate which slui recite the p"i. procedigs
21 before t e Secretary and shall state the grounds i )oi wlinch

22 appe ant relies to defeat the righlt of any adverse yArty to
23 re 'er, or to establish his own right to recover, tie I nages

24 Iaimed, with proof of service thereof upon each adv rse

2~ party. Such an appeal by al ap)Pellant who has been ordered 1





88


7


2 veunless, within thirty days froin and after thc date of fl#

3 Se c'tary's order, tie appellant also files with the cl a

4 bond i the aniount of 130 per centun of the amioun of the
reparati i awarded, conditioned upon the payme t of any
6 money jud nent entered by the court against t c appellant,
.-7 plus interest id costs, including a reasonable attorney's fee

8 for the appellee, if the appellee shall p Avail. Such bond
shall be in the fori of cash, negotiable securities having a
10 market value at least equivalent to t c amount of bond pre-
11 scribed or the under g of a urety company approved

12 by the court. The clerk of thcoArt shall immediately forward
13 a copy of the petition to th secretary, who shall forthwith
14 prepare, certify, and file in saik court a true copy of the
15 Secretary's decision, fi dings of fac conclusions, and order
16 in said case, togethe with copies of the leading upon which
17 the case was lica and submitted to the secretary. Such suit
18 in the district ourt shall be a trial de novo ,d shall proceed

19 in all respe ts like other civil suits for damao except that
20 the fimidi gs of fact and order or orders of the Sec -etary shall
21 be 1)ir na facie evidence of the facts therein stated. appel-
22 le -hall not bc liable for costs in said cort and, if he pr ails,
23 ic shall be allowed a reasonable attorney's fec to be ta ed
and collected as a part of his costs.








8


2A ct, and aga1(inst whloi an order for tihe laynlt of money
3 -isbeen issued, shows to the satisfaction of the Secreta

4 wit in five days fromn the expiration of the period all ved
5 for coi pliaice with such order either that he has t- mn an

aj)peal a. provided for in subsection (g) of setion or

7 that payineiln has )een made in full as required y such order,
8 he shall be susi ended automatically as a regstrant under the

9 Act at the expirat in of such five-day per d until he shows to
10 the satisfaction of e Secretar l' th the amount therein
11 specified has been paid, with inter t thereon to date of pay-
12 meant. If an appeal is t -en y such defendant and the
13 judgment of the court is ad rse to the appellant, or if the

14 appeal is dismissed, unles the fendant within the five days
15 thereafter makes payn it as requi -ed by the order, he shall
16 be suspended auton tically as a reis rant until lie shows to
17 the satisfaction o the Secretary that pay ent has been made,

18 withi interest ereoi to date of payment. I such a judgment
19 is stayed 1 a court of competent jurisdiction, lie Suspension
20 shall be onie effective five days after the expir' 01) of sili
21 stay less full payineiit has been made, with ii crest to
22 d e of payicneit, aid shall continue until the def('ndant hws
23 to the satisfaction of the Secretary that he has made s ch

payment, with suc'h interest.





90


0
I
2order for tl, payment of inoncey* has been. issued, *show, to

3 t csatisfactlon of the Secr-etary within. five days frg n the
4 expi tion of the period allowed for compliance 'ith such

order ci icr that he has taken an appeal as pr ided for in
6 subsection g) of this section or that pa ent has been

7 made in full a required by such order, defendant shall

8 be liable to a pci dty of $500 per d for each day, after
9 said five days, in w *ch le engags in any business subject

i0 to this Act, until such efend "t shows to the satisfaction
:11 of the Secretary that the a unt specified in the order, with

12 interest to date of pay nt, is been paid, which penalty
13 shall accrue to the Uiited States. If an appeal is taken by
14 such defendant, sd penalty shall n begin to accrue until
15 five days after *hdgment by the court a 7erse to the defend-
16 ant, or disn ssal of the appeal. If such a ju gment is stayed
17 by a coi of competent jurisdiction, the penalt shall become
18 applI able beginning five days after the expirai n of such

19 St Y unless full payment has been made, with int -est to
20 date of payment, and shall continue to be applicable .til
1 such payment, with interest, has been made.".
22 SEC. Said Packers and Stockyards Act is further
23 amended by adding after section 408 (7 U.S.C. 229) a new"
24 section 409 to read as follows:





91


-10-



1 "SEC. 409. Each packer, market agency, or dealer pur-

,chasing livestock shall, before the close' of the next"business
iday following the purchase of livestock and transfer of. pos-
'-session thereof, transmit or deliver 'to the seller or his -duly
.authorized agent the full amount of the purchase price,
(in writing
,'unless otherwise expressly ag-e between the parties before
"the purchase of the livestock. Any such agreement shall be
-disclosed in the records of any market agency or dealer sell-
.-ing the livestock, and in the purchaser's records 'and on the

accounts or other documents issued by the purchaser relating
to the transaction. Any delay or attempt to delay by a market
.2 agency, dealer, or packer purchasing livestock, the collection
3. of funds through the mails, or otherwise for the purpose of

4 or resulting in extending the normal period of payment for
.5 such livestock shall be considered an 'unfair practice' in vio-

'6 nation of the Act. Nothing in this section shall be deemed to

,7 limit the meaning of the termn 'unfair practice' as used in
*8 the Act.".





92



l n.- "- .. .


9 SEC_4 Said 'Packers and Stockyards Act, 1921, as
10 amended (7 U.S.C. 181, et seq.), is hereby further amended
after section 205 (7 U.S.C. 195).
by adding tcreoa new section 206, to r-ad as follows:
12 "S4oe. 206. (a) It is hereby found that a burden on and
13 obstruction to commerce in livestock is caused by financing
14 arrangements under which packers encumber, give lenders

15 security interest in, or place liens on, livestock purchased
16 by -packers in cash sales, or on inventories of or receivables or proce

17 from meat, meat food products, or livestock products there-
18 from, Yvheh payment is not made for the livestock and that

19 such arrangements are contrary to the public interest. This
20 section is intended to remedy such burden on and obstruction
21 to commerce in livestock and protect the public interest.
All livestock purchased by a packer
22-
2' (b) IL R110!- Ye rala f.. JLayp:.k,


\and all)J..
24 sncd or to h: auraged in cash sales, inventories of
25 or proceeds'/
or oR recemvablesrrom meat, meat food products, or livestock





93


11
derived shall be held by such packer in
1 p ro d ucts r" ,, ,-, s,, ,. r ,+,,, s- ur 6,,
trus for the benf it of"thesel.ers of such
li-esteel;i lilventor. -.i.f CX.. 'S of the amount
livestock until full payment for such livestock
3whieli is owed@ to iiipaid Ripbers of livestock inl c(i-IJ)-sAf1,-
has been received by such sellers. Payment shall
4n1 ppm o a.. c..........rAt v"r t o o"0 arrangeinf i-
not be considered to have been made if the seller

receives a payment instrument which is dishonored.
nn".6 ,'-. L~ IT ilia, n,. ',,' +'' h xtent t at ;f ; i -irk

7 ri ecti"n.

8 "(c) For the purpose of this section, a cash sale means

9 a sale in which the seller does not expressly extend credit

10 to the buyer.".

11 SEC\. Said Packers and Stockyards Act is further
"new,
12 amended by adding after action 409 (7 U.S... 20), a

13 new section 410 to read as follows:
"Sec. 410. No requirement of a State or territory

of the United States or any subdivision thereof
"15 p.r..... 1 .. f.I l;,-,,ock.l mats, ,-r, ,,,,,lt,., shall ha.ve piority,
with respect to bonding of packers orlrompt payment

by packers, for livestock purchases may be enforced
1 ,1 Of tile A t o.f... 1, 1898, ,,itilIl 'Anl Act to (,'tW]1-
by any State or' territory of the United States or

any instrumfentality or subdivisiIon thereof upon

any packer operating in compliance wi th bonding

provisions under the Act of July 12, 1943 (57 Stat.
21 4iIncluded wI4ihi w.4id c.1lus (5 )n pihtm ill-an olierl
422; 7 U.S.C. 204), an prompt payment provisions

of section 409 of this Act respectively."
23 te Thl~r pt 'IFa PnRkPr, IIarIket agreny, or lcrs
24





94


12
1S- If any provision of this Act or the application
2 thereof to any person or circumstances is held invalid, the
3 validity of the remainder of the Act and the application of
4 such provision to other persons or circumstances shall not be

5 affected thereby. Pciiding proceedings shall not be abated
.6 by reason of any provision of this Act, but shall be disposed
7 of pursuant to the provisions of the Packers and Stockyards
8 Act, 1921, as amended, and the Act of July 12, 1943, in

9 effect immediately prior to the effective date of this Act.





95


Mr. BERGLAND. I make a point of order. A quorum is not present.
The CHAIRMAN. The gentleman from Minnesota makes a point of
order that a quorum is not present.
The clerk will call the roll.
[The rollcall follows:]
Present: Representatives Bergland, Baldus, Krebs, Hightower, Bedell,
Sebelius, Thone, Johnson, Kelly, Moore, Foley, Breckinridge, Fithian, D'Amours,
Madigan.
The CHAIRMAN. How is Mr. Jones of Tennessee recorded? Record
him present. How is Mr. Melcher recorded?
The CLERK. He is not recorded.
The CHAIRMAN. Record him present. How is Mr. Wampler of
Virginia recorded?
The CLERK. He is not recorded, Mr. Chairman.
The CHAIRMAN. Record him as present. How is Mr. Poage recorded?
The CLERK. He is not recorded.
The CHAIRMAN. Record him present.
The clerk will report the results of the rollcall.
The CLERK. Nineteen members answered when their names were
called.
The CHAIRMAN. Nineteen members having answered, a quorum is
not present.
The Chair, of course, will receive a motion to adjourn at this point.
Perhaps that could be restrained for a moment, so that we could
begin discussion.
Without objection, we will proceed.
Mr. KELLY. Mr. Chairman, I reserve the right to object.
The CHAIRMAN. The gentleman will state his reservation. The Chair
advises the gentleman from Florida that only 2 days were scheduled
for the consideration of this legislation.
Furthermore, I doubt very much that we will complete action this
morning. Certainly the gentleman's rights to offer his amendments
will be protected.
Mr. KELLY. Thank you, Mr. Chairman. I withdraw the reservation.
The CHAIRMAN. The gentleman from Florida withdraws his
reservation.
Are there any amendments to the bill?
Mr. HIGHTOWER. Mr. Chairman?
The CHAIRMAN. The gentleman from Texas is recognized.
Mr. HIGHTOWER. Mi r. Chairman, while the amendment is being dis-
tributed by the clerk, this is an amendment to section 409 in regard
to prompt payment.
The chief addition made bv this amendment is to provide that pay-
ment must be made before the close of the next business day following
the purchase of livestock.
It must be made at the point of transfer of possession. One of the
problems that we have had is that the purchasers have been able to
delay payment. The producer has no way of knowing whether or not
he has a good check or whether he is going to be able to collect on
his check because so many times checks are. put in the mail and any
delay is blamed on the fact that the mail was not prompt.
So in order for him to protect his rights he needs to know whether
or not he has made a sale or whether he is going to get his money.





96


The payment then must be at the close of the end of the next busi-
ness day.
This gives him an opportunity to do something about it if he has
not gotten his money.
It provides that the delivery of that payment must be made at the
point of the transfer of possession.
This eliminates the matter of the check coming from a great distance.
Mr. BERGLAND. Will the gentleman yield?
Mr. HIGHTOWER. Yes.
Mr. BERGLAND. I am not quite sure what the difference is between
section 409 of the committee print and the gentleman's amendment.
On line 4 you refer to "transmit." Does that mean mail? That's
the same language as in the print.
Mr. HIGHTOWER. Where are you reading from?
Mr. BERGLAND. I am reading from your amendment. You say "trans-
mit or deliver." That is on line 4.
Mr. HIGHTOWER. The transmit could mean mail there, but he has
to receive it before the end of the next business day.
Mr. BERGLAND. The seller would have to receive it?
Mr. HIGHTOWER. Yes.
Mr. BERGLAND. I am not familiar-
Mr. HIGHTOWER. And transfer of possession.
Mr. BERGLAN-D. If the gentleman will yield further and explain to
me this. The trucker picks up the livestock and hauls it to the
slaughterhouse some distance away.
Where is the point of transfer in that transaction?
Mr. HIGHTOWER. The point of transfer is at the point of delivery.
If he comes, that is, if the purchaser picks up the livestock, then
at the point that he picked it up, as I understand it, is the point of
delivery.
Mr. BERGLAND. So the check would then have to be delivered at the
feed lot by the close of the next business day?
Mr. HIGHTOWER. That's right.
Mr. BERGLAND. I am not familiar with the electronic type transfer,
but that presumably would be the only method by which the slaughter-
house located any distance away could get the check to the producer-
Mr. HIGHTOWER. Not at all.
I understand back some years ago that the procedure was that the
purchasing agent would carry checks with him. They got away from
that as a matter of practice.
Mr. POAGE. Will the gentleman from Texas yield?
Mr. HIGHTOWER. Yes.
Mr. POAGE. I think we could clear that up with this explanation.
Texas, Oklahoma, and Kansas all now have State legislation requiring
this kind of payment on the day of the transfer.
This bill gives an extra 24 hours to the packer, that is 24 hours in
those three States, and they are three of the large producing States.
It has been working. It has been the law in Texas for about 18
months, I believe.
I believe it is the same time in Kansas, is it not?
Mr. SEBELIUS. Yes.
Mr. PO.AGE. All three of the States adopted this thing nearly 2 years
ago.