---
kind: "section"
citation: "7 U.S.C. § 196"
title: "7"
title_heading: "Agriculture"
number: "196"
heading: "Statutory trust established; livestock"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/7/196"
units:
  - "Chapter 9 — Packers and Stockyards"
  - "Subchapter II — Packers Generally"
  - "Part A — General Provisions"
---

# §196. Statutory trust established; livestock

- (a) **Protection of public interest from inadequate financing arrangements—** It is hereby found that a burden on and obstruction to [commerce](/usc/7/182.md?p=11) in [livestock](/usc/7/182.md?p=4) is caused by financing arrangements under which [packers](/usc/7/198.md?p=2) encumber, give lenders [security](/usc/7/24.md?p=b) interest in, or place liens on, [livestock](/usc/7/182.md?p=4) purchased by [packers](/usc/7/198.md?p=2) in cash sales, or on inventories of or receivables or proceeds from meat, [meat food products](/usc/7/182.md?p=3), or [livestock products](/usc/7/182.md?p=5) therefrom, when payment is not made for the [livestock](/usc/7/182.md?p=4) and that such arrangements are contrary to the public interest. This section is intended to remedy such burden on and obstruction to [commerce](/usc/7/182.md?p=11) in [livestock](/usc/7/182.md?p=4) and protect the public interest.
- (b) **Livestock, inventories, receivables and proceeds held by packer in trust for benefit of unpaid cash sellers; time limitations; exempt packers; effect of dishonored instruments; preservation of trust benefits by seller—** All [livestock](/usc/7/182.md?p=4) purchased by a [packer](/usc/7/198.md?p=2) in cash sales, and all inventories of, or receivables or proceeds from meat, [meat food products](/usc/7/182.md?p=3), or [livestock products](/usc/7/182.md?p=5) derived therefrom, shall be held by such [packer](/usc/7/198.md?p=2) in trust for the benefit of all unpaid cash sellers of such [livestock](/usc/7/182.md?p=4) until full payment has been received by such unpaid sellers: Provided, That any [packer](/usc/7/198.md?p=2) whose average annual purchases do not exceed $500,000 will be exempt from the provisions of this section. Payment shall not be considered to have been made if the seller receives a payment instrument which is dishonored: Provided, That the unpaid seller shall lose the benefit of such trust if, in the event that a payment instrument has not been received, within thirty days of the final date for making a payment under [section 228b of this title](/usc/7/228b.md), or within fifteen business days after the seller has received notice that the payment instrument promptly presented for payment has been dishonored, the seller has not preserved his trust under this subsection. The trust shall be preserved by giving written notice to the [packer](/usc/7/198.md?p=2) and by filing such notice with the [Secretary](/usc/7/182.md?p=2).
- (c) **Definition of cash sale—** For the purpose of this section, a cash sale means a sale in which the seller does not expressly extend credit to the buyer.

## Source credit

(Aug. 15, 1921, ch. 64, title II, § 206, as added Pub. L. 94–410, § 8, Sept. 13, 1976, 90 Stat. 1251.)