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Alabama Grain Dealer Bond and Warehouseman’s Bond
Grain dealers and warehouse operators are regulated by the Gins and Warehouses Division of the Alabama Department of Agriculture and Industries (ADAI). Part of that regulation requires grain dealers and public warehousemen (including cotton and grain warehouses) to secure a license bond. Jet supplies these bonds to the licensee as a financial guarantee to the public and the ADAI if the licensee acts fraudulently and defies the statutes.
Whether you are applying for the first time or renewing your permit, Jet is happy to help provide the required surety bond in a stress-free and efficient manner.
What Is the Bond Limit and Cost of the Grain Dealer Bond and Warehouseman’s Bond?
The bond limit and a review of your credit (which doesn’t affect your score) are the factors used to get you an approved rate. The bond cost starts at $10 monthly or $100 annually and is only a small percentage of the required bond limit. Jet is the only surety company licensed in Alabama that offers a monthly payment option for both of these surety bonds.
Public warehouse operators have a maximum bond limit of $5,000, but the limit is determined by the Commissioner of Agriculture and Industries based on a calculation of $5 per bale of total storage capacity. Most warehousemen will be approved for a rate of $100 for one year. Refer to the chart below showcasing the preferred pricing tier for a $5,000 bond:
| Bond Term | Cost |
|---|---|
| Monthly | $10 |
| 1 Year | $100 |
| 2 Years | $175 |
| 3 Years | $250 |
The bond limit for grain dealers is 10% of the total dollar amount the dealer paid to the producer(s) for grain purchased within the previous 12-month license period. That said, the bond limit is always between $25,000 and $100,000. New grain dealers will only need the minimum bond amount of $25,000 for the first year. An underwriter must review your application to get you an approved rate, but the process is quick!
Why Does the ADAI Require Bonds for Warehouse Operators and Grain Dealers?
The State of Alabama Department of Agriculture and Industries exists to provide regulations for businesses and individuals in the agriculture industry, with the goal of protecting the welfare of Alabama’s public. The surety bond is just a way for the ADAI to financially protect both itself and the public from licensee misconduct and fraud. The surety bond requirement can be reviewed in the Code of Alabama 1975 Section 2-31-4 for grain dealers and Section 8-15-7 for public warehouse operators.
Jet Insurance Company acts as a mediator between the grain dealer or warehouseman and the ADAI, ensuring that reimbursement will be provided to any person financially damaged due to the licensee’s actions.
There are some exemptions from the Grain Dealer Bond, as follows:
- Grain farmers who buy grain for use as feed or seed
- Seed dealers or processors
- Those licensed under the United States Warehouse Act
The term “grain”, within this legislation, refers to corn, wheat, soybeans, aots, barley, rye, grain sorghums, or other commodities.
How to Apply for a Grain Dealer Bond or Warehouseman’s Bond in Alabama
Applying for either bond with Jet takes only minutes to complete. All that’s needed is basic information, including your social security number for a soft credit check. For the Alabama Warehouseman’s Bond, you will often be approved for a rate and be able to purchase the bond instantly. For the Alabama Grain Dealer Bond, an underwriter will review the application and send you an approved rate via email, which can be purchased online. A copy of the bond and receipt will be available immediately after purchase.
Can Jet File the Grain Dealer Bond and Warehouseman’s Bond to the ADAI for Me?
Yes! Jet will take care of filing the bond to the ADAI after payment is completed. A copy of the bond is available electronically after purchase, but a physical copy will be sent to you as well.
If you have other paperwork to submit to the ADAI, you can choose to have the original bond sent to you when providing payment. All licensure paperwork should be sent to the address below:
Alabama Commissioner of Agriculture and Industries
Gins & Warehouses Division
1445 Federal Drive
Montgomery, AL 36107
Can I Cancel My Grain Dealer Bond or Warehouseman’s Bond and Get a Refund?
With Jet, you are able to cancel the bond at any time. All that’s needed is a written request, which can be done via email to [email protected].
The ADAI has a 60-day cancellation provision, meaning once they are notified of cancellation, they will keep the bond active for an additional 60 days. During this time, the bond is still providing coverage, and therefore we must account for this time as active coverage when calculating a refund.
For bonds purchased annually or on multi-year terms, a refund may be available depending on how much time is left on the bond. Those on monthly payments will not receive a refund, but the payments will stop after the 60-day cancellation period has ended.
How to Renew the Grain Dealer or Warehouseman’s Bond
If you are utilizing the monthly payment plan, there is no renewal process! As long as payments are continually coming out of your preferred account, the bond will stay active. Another benefit of paying monthly is that it allows you to lock in a rate for years to come.
For bonds that have been paid in full, Jet sends you a notice via email and mail with ample time to provide payment for renewal.
Any changes in the bond limit can be addressed at this time. Please let Jet know so we can keep you covered in the appropriate amount as prescribed by the ADAI.
How Do Warehouse Operators and Grain Dealers Avoid Bond Claims?
Claims are avoided by following the rules, regulations, and laws applicable to your license within the Code of Alabama 1975. For both the Grain Dealer Bond and Warehouseman’s Bond, there are various actions that cause infractions against the license.
The ADAI can take action against the licensee for themselves or on behalf of any person who has filed a written complaint. Typically, the ADAI will investigate and may schedule a hearing to decide how to proceed. At this time, the licensee should be responsive and work with both the ADAI and the court to resolve any issues before action on the bond is taken as reimbursement to the affected person(s). Failure to comply may result in fines, revocation or suspension of the license, and/or a bond claim.
The most common reasons a grain dealer might be investigated by the ADAI are failing to pay for grain supplied by a producer, licensure fees, or other fees that are due.
Common reasons for the ADAI to initiate an investigation of a warehouse operator are the use of a public warehouse for purposes other than intended by law or failure to upkeep the warehouse to license standards.
What Happens if I Get a Claim on the Grain Dealer Bond or Warehouseman’s Bond?
By the time a claim reaches Jet, it has been thoroughly inspected by the Department of Agriculture and Industries. However, Jet still takes the time to review the details.
If the claim is found to be valid, Jet will provide payment to the claimant up to the full bond limit. Since the bond acts as a line of credit, and you are responsible for your actions, you must pay Jet back in the amount that was paid out. Failure to restore the bond to the full limit will result in difficulties in receiving the required bond and permit complications.
