(a) The security charges provided for in Section 62561 shall be collected until January 1, 2007. Unless otherwise permitted by this section, the secretary shall thereafter discontinue collection of the security charges. The fund shall consist of the fund cash, the value of any alternative financial instrument, and acceptable securities provided by handlers pursuant to subdivision (c).

(b) If, after January 1, 2007, payment of producer claims reduces the fund cash below thirty million dollars ($30,000,000), the secretary may resume collecting security charges in order that the fund cash is thereafter maintained at thirty million dollars ($30,000,000). Security charges necessary to return the fund cash to thirty million dollars ($30,000,000) shall, subject to subdivision (c), be collected from all handlers making purchases of eligible milk, including handlers who have posted acceptable securities pursuant to subdivision (c).

(c) If, in any month, 110 percent of any handler’s average monthly eligible milk purchases, computed over the preceding 12 months, unless the increase in value of eligible milk purchases is the result of substantial business expansion or the result of a merger or acquisition, in which case the 12-month computation requirement does not apply, exceeds the fund cash as of the end of that month, or thirty million dollars ($30,000,000), whichever is higher, the secretary shall require that handler to provide acceptable securities, as calculated consistent with subdivision (e), within 10 working days in an amount equal to the difference between the fund cash or thirty million dollars ($30,000,000), whichever is higher, and 110 percent of that handler’s average monthly eligible milk purchases. When handlers have provided acceptable securities covering the difference, the secretary shall not collect security charges from those handlers for the portion of their average monthly eligible milk purchases covered by acceptable securities. Shipments to handlers failing to provide acceptable securities within 10 working days of notice by the secretary of the obligation to post acceptable securities, as required by this subdivision, shall be listed by the secretary as ineligible for coverage under the fund pursuant to Section 62586.

(d) The secretary shall calculate the value of handlers’ average monthly eligible milk purchases at least once each year for those handlers whose previous average monthly eligible milk purchases exceed twenty million dollars ($20,000,000). If, as a result of any such calculation, the secretary determines that a handler must provide additional acceptable securities, as calculated consistent with subdivision (e), to satisfy the requirements of subdivision (c), that handler shall provide additional acceptable securities within 10 working days of notice by the secretary.

(e) In calculating the amount of an acceptable security pursuant to subdivision (c) or (d), the secretary shall not take into account milk that a handler purchases from a producer with a beneficial ownership interest in the handler, as defined for purposes of paragraph (7) of subdivision (a) of Section 62580.

(f) In the event a handler fails to comply with subdivision (d):

(1) In addition to paying all other amounts required by this chapter, including any security charges then in effect under subdivision (a) of Section 62561, that handler shall pay an enhanced security charge on all eligible milk purchased to be computed as follows:

(A) 3.2 mills ($0.0032) per pound for fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.

(B) 1.3 mills ($0.0013) per pound for solids-not-fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.

(2) A handler shall be liable for the enhanced security charges required by this section until the handler provides the required additional acceptable securities to the secretary. Notwithstanding subdivision (b), enhanced security charges paid pursuant to this paragraph shall be deposited into the fund and become part of the fund cash.

(g) If a handler fails to timely provide acceptable securities, or additional acceptable securities, as required by this section, the secretary shall promptly give notice of that fact to all producers who have a contract on file with the secretary, all nonprofit cooperative associations, and other interested parties. A handler failing to post acceptable securities may also be subject to revocation, suspension, or nonrenewal or placement of conditions upon the handler’s license pursuant to Sections 62146, 62149, and 62151.

(h) In consultation with the board, the secretary may consider and use alternative financial instruments, in addition to, or in lieu of, using security charges to meet the financial security requirements of this section.

(Amended by Stats. 2019, Ch. 304, Sec. 17. (AB 590) Effective January 1, 2020.)