Grain company security
Under the Canada Grain Act, the Canadian Grain Commission may fix the security to be provided by licensed grain dealers and licensed operators of primary, process and terminal elevators. Security must be provided to cover all eligible liabilities pursuant to the Canada Grain Act and the Canada Grain Regulations. The Canadian Grain Commission establishes the amount of security each licensee must provide. All security must be tendered in Canadian funds.
Security may be provided in the form of:
For primary and process elevators and grain dealers, security covers only producer liabilities. If a licensee refuses or fails to pay producers for grain delivered, eligible producers can make a claim against the company’s security through the Safeguards for Grain Farmers Program.
You may provide security in the form of a bond. The bond must be:
- issued from one of the insurance companies on the Treasury Board of Canada Secretariat’s list of acceptable bonding companies
- fully executed on bond form CS720 (PDF – 55 kb)
An acceptable bond must be in the amount established, and signed and sealed by the licensee (or licence applicant) and bonding company. If either party does not have a seal, then two signatures are required from that party.
Irrevocable Standby Letter of Credit or Guarantee
You may provide security in the form of an Irrevocable Standby Letter of Credit or Guarantee issued by a Canadian chartered bank, caisse populaire, credit union, provincial government or provincial government agency. Letters of Credit or Guarantee must cover a period of 18 months from your annual licence renewal date. A 12-month coverage period is not enough.
The additional 6-month period is used to determine eligible producer claims and make a demand for payment on the Letter of Credit or Guarantee if a licence is revoked, suspended, or expires. For example, if your annual renewal date is May 1, 2017, letter of credit coverage for that renewal period expires October 31, 2018.
An acceptable Letter of Credit or Guarantee must be in the amount established by the Canadian Grain Commission, specify the correct expiry date, and include the following wording:
This credit is available by payment, against presentation of a certificate signed by an authorized officer of the Canadian Grain Commission stating that loss or damage has occurred by reason of:
- [licensee] has defaulted in its obligations pursuant to the Canada Grain Act to eligible holders of cash purchase tickets, elevator receipts and grain receipts, for the payment of money or delivery of grain issued by [licensee]; or
- [licensee] has failed or refused to comply with the Canada Grain Act or any regulation or order issued pursuant to the Canada Grain Act.
Partial payments are permitted.
A Standby Letter of Credit or Guarantee must not contain any wording about automatic extension or renewal, provisions for an accelerated expiry date, or cancellation provisions for anyone but the Canadian Grain Commission.
You may provide security in the form of payables insurance. Payables insurance is consistent with the current security program. To participate, you must provide financial information as part of the application and qualification process. Please contact Licensing for more information about this option.
- For more information about grain company licences and exemptions, contact Licensing and Security
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