8 CCR 1202-11 Part 8 - Irrevocable Letters of Credit In Lieu Of Surety Bonds
8.1. These rules shall apply to all
irrevocable letters of credit that are submitted by licensees under the Act in
lieu of a surety bond required by the Act as a condition of
licensure.
8.2. A licensee may
submit an irrevocable letter of credit issued by a state or national bank, or
by a state or federal savings and loan association doing business in Colorado,
or by a bank for cooperatives organized pursuant to federal statutes, serving
the region in which the state of Colorado is located, that currently meets all
applicable minimum capital requirements imposed under state and/or federal law,
in lieu of a surety bond required by the provisions of sections
35-36-216, C.R.S., and
35-36-304, C.R.S.
8.3. The beneficiary named in the letter of
credit shall be the Colorado Commissioner of Agriculture in favor of the people
of the state of Colorado. Payment shall be made immediately upon presentation
of sight draft(s) signed by the Commissioner of Agriculture, or their
designated representative, without accompanying supporting
documentation.
8.4. All letters of
credit shall conform to the Commissioner's standard letter of credit form. A
standard letter of credit form is available upon request from the Division of
Inspection and Consumer Services, Colorado Department of Agriculture, 305
Interlocken Parkway, Broomfield, CO 80021 and available on the Department's
website at www.colorado.gov/ag/ics.
8.5. A sight draft upon a letter of credit
may be presented for payment for the reasons that surety bond proceeds may be
demanded for disbursement under the provisions of Title 35, Article 36,
C.R.S.
8.6. Letters of credit shall
have a term of three (3) years and shall be automatically renewable for
additional one (1) year term. Any authorization of a shorter time period shall
be at the sole discretion of the Commissioner or designee. A letter of credit
may be revoked by the licensee or issuer only at its expiration date, and by
giving the Commissioner at least one hundred twenty (120) calendar days written
notice prior to the expiration date. Notice is deemed to have been given as of
its receipt by the Commissioner. Upon such notice timely received, the licensee
shall be required to arrange for substitution of a suitable surety bond or
another irrevocable letter of credit that meets the requirements of Sections
35-36-216 and
35-36-304, C.R.S., at least sixty
(60) days prior to the expiration of the letter of credit. If the Commissioner
does not timely receive satisfactory evidence of such arrangements, the
Commissioner may proceed in accordance with the provisions of sections
35-36-205(1)(e)
or 35-36-306(1)(d),
C.R.S., as applicable.
8.7. If a
licensee desires to surrender its license and requests the release of a letter
of credit, the licensee must return its license and make written request by
certified mail, return receipt requested, for the release of the letter of
credit. The Commissioner shall retain the letter of credit for a period of 548
calendar days, approximately 18 months, following receipt of the written
request and the returned license, or until such time that the Commissioner is
satisfied that no claims against the licensee exist, before notice of release
is transmitted to the issuer.
8.8.
In the event that a licensee desires to substitute a surety bond for a letter
of credit, then in possession of the Commissioner, the letter of credit shall
remain in force for a period of 548 calendar days, approximately 18 months,
following the effective date of the surety bond, or for such time as may be
required to fully ascertain the existence of any claims against the licensee,
whichever period is longer. Thereafter, notice of release shall be transmitted
to the issuer of the letter credit.
8.9. In the event that a plurality of letters
of credit from any number of issuers are presented in satisfaction of a
licensee's bonding obligation, the Commissioner may satisfy claims under the
applicable provisions of Title 35, Article 36, C.R.S., by presentment of sight
drafts against one (1) or more such letters of credit, without regard to
proration.
8.10. A licensee shall
be required to augment letters of credit in any situation where it would be
required to increase its coverage under a surety bond. Such augmentation shall
be commensurate to the increased surety bond coverage requirement. The new
letter of credit issued in the new required amount may be substituted for a
prior letter upon the renewal date of the prior letter.
8.11. A licensee or prospective licensee may
present any combination of letters of credit and surety bonds in satisfaction
of its bonding requirement under the applicable provisions of Title 35, Article
36, C.R.S. In making disbursements for claims, the Commissioner shall draw upon
the letter(s) of credit first and make demand upon surety bond(s)
second.
Notes
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