Relating to credit transactions involving agricultural items, including by providing for warehouse drying or storage liens on crops and by establishing a central filing system relating to security interests in farm products, providing fees, and including applicability, contingent implementation, and effective date provisions

Thus, a warehouse could enforce the lien before all other competing security interests and statutory liens, including agricultural liens, and common law liens regardless of if or when the competing security interest or lien was perfected. In this case, the lien is created as a possessory lien in favor of the warehouse acting as a special type of creditor serving as custodian and referred to as a bailee (see Code chapter 554, article 7). The lien is automatically perfected at the time the warehouse takes possession of the crop. The warehouse’s special perfection status expires on March of the calendar year following the calendar year that the debtor delivered the crop to the warehouse. The lien is terminated when the warehouse relinquishes possession of the crop. During the period that the lien is perfected, the warehouse may enforce the lien in the same manner provided for perfected agricultural liens under the UCC. The new lien does not affect other possessory liens, or other security interests or agricultural liens that may be held by the warehouse. The lien is applicable to a crop delivered by a debtor for drying or storage to a warehouse on or after July 1, 2020. BACKGROUND.9201).9308). There are several ways in which a creditor may perfect a security interest, including by possession.7209).9308). In addition, various Code chapters existing outside the UCC create agricultural liens in commodities produced by a farming operation.9102(1)(e)).9338). CENTRALIZED FILING SYSTEM. The bill creates a centralized, statewide filing system (system) for security interests in farm products to notify buyers of farm products subject to an attached security interest.9102). The system must be certified by the United States department of agriculture. The bill allows a person who has a secured interest attached to farm products to complete and file a document referred to as an effective financing statement or a statement amending, continuing, or terminating the effective financing statement, with the secretary of state. The secretary must compile information contained in the effective financing statements into a master list organized according to farm products which the secretary must regularly distribute to buyers of farm products registered with the secretary. The secretary may also respond to verbal or written inquiries by buyers including unregistered buyers and deliver a written confirmation to inquiring buyers regarding whether a farm product is subject to a security interest. If a buyer registers with the secretary prior to the purchase of farm products, the registered buyer takes subject to the security interest only if the secured party has filed an effective financing statement that covers the farm products being sold, unless the registered buyer secures a release of the security interest. If a buyer fails to register with the secretary, the buyer takes subject to the security interest only if the secured party has filed an effective financing statement that covers the farm products, and the buyer could have discovered the existence of the effective financing statement by conducting an inquiry and receiving a response and confirmation. The bill authorizes the secretary to establish fees for secured parties filing effective financing statements and buyers registering with the secretary. The secretary must adopt rules as necessary to implement, administer, and enforce the provisions of the system. The system becomes effective on the first business day occurring days after certification by the United States department of agriculture and publication of three successive notices in the Iowa administrative bulletin. BACKGROUND.9320). However, notwithstanding this exception, a buyer who purchases a farm product from a person engaged in farming operations may not take free of a security interest. §1631), preempts the state’s article requirements by providing that a buyer in the ordinary course of business, a commission merchant, or a selling agent (all classified under the term “buyer”) may buy farm products without being subject to a security interest created by the seller but only if the buyer does not have actual or constructive notice of that security interest. The federal law allows states to elect between two notification options: (1) Iowa’s current law requiring the secured party to deliver direct notice to potential buyers of a secured party’s interest in the farm products within one year prior to sale, or (2) the system described in the bill. In either case, the federal law does not supersede article requirements that establish priorities among creditors.