Protecting Livestock Sellers through the Dealer Statutory Trust

Section 318 of the Packers and Stockyards Act (P&S Act) establishes a Dealer Statutory Trust, known as the Dealer Trust [7 U.S.C. § 217b]. The Dealer Trust ensures unpaid livestock sellers have priority rights to certain dealer assets until payment is made.

Do I Have a Potential Claim Under the Dealer Statutory Trust?

You may have a claim if you answer YES to all these questions:

  • Did a dealer (i.e., someone, not a market agency, who buys and sells livestock on their own account, or as the employee or agent of the vendor or purchaser) fail to pay you?
  • Does the dealer owe you for livestock (i.e., cattle, sheep, swine, equine, or goats)?
  • Was your transaction a cash sale as defined in 7 U.S.C. §196(c)?

If you answered NO to any of these questions, you do not have a potential trust claim.

How to File a Trust Claim

  1. The trust claim must be filed:
  • Within thirty (30) calendar days of the final due date for making a payment under Section 409 of the P&S Act (7 U.S.C. §228b), or
  • Within fifteen (15) business days of the date you received notice that the bank dishonored the dealer’s payment instrument (e.g., a check), if you timely presented it for payment.
  1. Provide written notice by mail or email to the dealer and request written confirmation of receipt. The notice must include:
  • The dealer’s name and contact information;
  • Your name and contact information;
  • The date(s) of any livestock transaction(s) for which the dealer owes you;
  • The amount(s) of the livestock transactions for which the dealer owes you;
  • The date(s) of any notice(s) you received indicating that the bank dishonored the dealer’s payment instrument(s); and
  • Copies of any relevant documents or other information that support the validity of your trust claim.

You may use the sample Dealer Trust Claim Notification (doc) as a template.

  1. Provide the same written notice from paragraph 2 above by mail or email to the Packers and Stockyards Division (PSD) at PSDclaims@usda.gov and request confirmation of receipt.
  2. Keep copies of the notice and receipts as records for your timely-filed claim.

What Must a Dealer Do if I Timely File a Valid Trust Claim?

  • If PSD determines the dealer is subject to the dealer trust, and you filed your trust claim timely, then the dealer must pay you and all other claimants who filed valid and timely trust claims in full. If the dealer cannot pay all the claimants in full, then the dealer must distribute the available proceeds from the affected assets among all the claimants with valid trust claims on a pro rata basis.
  • Within 15 days of receiving a trust claim, a dealer must notify anyone who has a security interest in, or liens on, the livestock held in said trust of their intent to preserve the benefits of the trust.

How Do I Withdraw a Trust Claim?

  • If full payment is received after the trust claim is filed, the claim should be withdrawn with written notification to PSD by mail or email.

When is Payment Due for Purchase of Livestock?

  • Under Section 409 of the P&S Act ( 7 U.S.C. § 228b):
    • If the dealer buys livestock from a seller and both parties agree in writing prior to the transaction on specific payment terms, those terms apply (in these cases the transaction is not a cash sale, and the livestock seller is not eligible to file a dealer trust claim).
    • Without an agreement in writing between the parties prior to the transaction, the dealer must deliver to the seller, or the seller’s duly authorized representative, the full purchase amount by the close of the next business day after livestock is purchased and possession is transferred.

Which of the Dealer’s Assets Does the Dealer Statutory Trust Affect?

  • All livestock purchased by the dealer in cash sales, and
  • All inventories of, or receivables or proceeds from such livestock.

How Does the Dealer Trust Benefit Me?

The dealer trust grants you and all other unpaid livestock sellers who file timely and valid trust claims against a subject dealer:

  • Rights to the dealer’s affected assets until the dealer fully pays you for your livestock or it fully distributes the proceeds from those assets among claimants with valid trust claims;
  • Superior legal claim to the dealer’s affected assets than the dealer’s secured creditors have over those same assets; and
  • Protection from claw back (when a bankruptcy trustee voids property transfers made by the debtor up to a year before filing for bankruptcy, requiring the recipients to return the property or its value to the bankruptcy trustee).

Notice of Private Right of Action

If claimants are concerned that the trustee is not fulfilling its fiduciary duties, claimants can file a trust action in U.S. District Court. Any such trust action should explain why the claimant(s) have a valid trust claim and which parties are owed what sums of money, by whom.

Where Can I Get Additional Information About the Dealer Statutory Trust?

NOTE: If a dealer who owes you for livestock also maintains a bond or bond equivalent for its business subject to the P&S Act, you may also file a bond claim. See How to File a Bond Claim for more information.

Contact PSD to request additional information about the dealer statutory trust. PSDclaims@usda.gov