Title 7, AgricultureRelease 119-110

§196 Statutory Trust Established; Livestock

Title 7 › CHAPTER 9 — PACKERS AND STOCKYARDS › SUBCHAPTER II — PACKERS GENERALLY › Part A — General Provisions › § 196

Last updated Sep 22, 2026|Official source

Summary

Packer companies must hold any livestock they buy in cash sales, and any meat, meat products, or money owed from those products, in trust for any sellers who have not been paid. The packer cannot treat those animals, inventories, receivables, or proceeds as free collateral or sell them to pay other debts until the unpaid sellers get full payment. Packers whose average yearly purchases are $500,000 or less are exempt. If a seller gets a check or other payment that bounces, that is not payment. A seller keeps the trust rights only if they act quickly. If no payment instrument was received, the seller must protect the trust within 30 days after the final payment date under section 228b. If the seller got notice that a payment instrument was dishonored, they must act within 15 business days after that notice. To preserve the trust, the seller must give written notice to the packer and file a copy with the Secretary. A "cash sale" means the seller did not clearly extend credit to the buyer.

Full Legal Text

Title 7, §196

Agriculture, Source: USLM XML via OLRC

(a)Protection of public interest from inadequate financing arrangements

It is hereby found that a burden on and obstruction to commerce in livestock is caused by financing arrangements under which packers encumber, give lenders security interest in, or place liens on, livestock purchased by packers in cash sales, or on inventories of or receivables or proceeds from meat, meat food products, or livestock products therefrom, when payment is not made for the livestock and that such arrangements are contrary to the public interest. This section is intended to remedy such burden on and obstruction to commerce in livestock and protect the public interest.

(b)Livestock, inventories, receivables and proceeds held by packer in trust for benefit of unpaid cash sellers; time limitations; exempt packers; effect of dishonored instruments; preservation of trust benefits by seller

All livestock purchased by a packer in cash sales, and all inventories of, or receivables or proceeds from meat, meat food products, or livestock products derived therefrom, shall be held by such packer in trust for the benefit of all unpaid cash sellers of such livestock until full payment has been received by such unpaid sellers: Provided, That any packer whose average annual purchases do not exceed $500,000 will be exempt from the provisions of this section. Payment shall not be considered to have been made if the seller receives a payment instrument which is dishonored: Provided, That the unpaid seller shall lose the benefit of such trust if, in the event that a payment instrument has not been received, within thirty days of the final date for making a payment under section 228b of this title, or within fifteen business days after the seller has received notice that the payment instrument promptly presented for payment has been dishonored, the seller has not preserved his trust under this subsection. The trust shall be preserved by giving written notice to the packer and by filing such notice with the Secretary.

(c)Definition of cash sale

For the purpose of this section, a cash sale means a sale in which the seller does not expressly extend credit to the buyer.

Reference

Citations & Metadata

Citation

7 U.S.C. § 196

Title 7, Agriculture

Last Updated

Sep 22, 2026

Release point: 119-110