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FOREST SERVICE HANDBOOK
Denver, CO
FSH 6509.11k - SERVICE-WIDE FINANCE AND ACCOUNTING HANDBOOK
R2 Supplement No. 6509.11k-92-3
Effective September 30, 1992
POSTING NOTICE. Supplements to this title are numbered consecutively. Post by
document name. Remove entire document and replace with this supplement.
Retain this transmittal as the first page of this document. The last supplement to
this Handbook was Supplement 6509.11k-92-2 to Chapter 30.
Document Name
6509.11k,80
Superseded New
(Number of Pages)
9
Digest:
Updates direction on timber bonds and related issues, including procedures for
Irrevocable Letters of Credit.
ELIZABETH ESTILL
Regional Forester
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SERVICE-WIDE FINANCE AND ACCOUNTING HANDBOOK
CHAPTER 80 - BOND ADMINISTRATION, SECURITY AND REQUIREMENTS
82.33 - Irrevocable Letter-of-Credit. The necessary applicable bond forms SF-24,
SF-25, SF-25a, FS-6500-7, FS-6500-12, FS-6500-12a, FS-6500-13, FS-6500-13a, FS6500-17 and FS-6500-17a are required in addition to the irrevocable letter-of-credit.
The bond form shall be completed with the in-lieu-of surety statement as stated in
the parent text. The bank or issuing institution should not sign the bond form, only
the principal must sign. The bank or issuing institution's signature on the
irrevocable letter-of-credit is all that is required. The bond forms must accompany
the irrevocable letter-of-credit (ILOC). Do not approve the ILOC without a properly
completed bond form. The bond form must have a Date Bond Executed date equal
to or later than the date the irrevocable letter-of-credit was signed. For example, if
the bank/institution executes an ILOC on October 15, then the Date Bond Executed
date, by the principal, must have a date of October 15 or later. A bond with a Date
Bond Executed date earlier than this means that a valid ILOC did not exist at the
time the bond form was executed. The period of time (duration) covered by the bond
and the ILOC must agree.
Do not approve an ILOC containing major variation from the exhibit 02. The
following statement is not acceptable and the ILOC shall not be approved if it
includes this statement or a likeness:
"This credit is subject to the Uniform Customs and Practice."
The irrevocable letter-of-credit used for performance bond purposes must cover the
term of the contract plus a sufficient period of time to close out the contract. A
separate ILOC is required for each individual contract.
The ILOC used for timber sale payment bond purposes can be issued for a lesser
time period than the term of the contract. It should cover at least one year. The
ILOC and payment bond Forms FS-6500-12, Payment Bond, and FS-6500-12a,
Blanket Payment Bond, shall cover the same period of time as shown on the ILOC.
When the bank/institution issues the ILOC for a specific period of time, it shall be
necessary to establish a control to ensure a new irrevocable letter-of-credit or
extension, or other acceptable surety is obtained to maintain the bonding
requirements when the expiration date occurs. If the ILOC is not renewed, the
principal must pay cash in advance of cutting.
Exhibit 01 is an example of a completed Payment Bond, Form FS-6500-12.
Exhibit 02 is an example of an ILOC for blanket payment bond coverage. The ILOC
must show the aggregate amount authorized and list the specific timber sale
contracts with the contract number covered by the ILOC.
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Exhibit 03 is an example of the Blanket Payment Bond, Form FS-6500-12a, that
accompanies the ILOC in Exhibit 02. The timber sale contracts shall be listed on
the reverse side of the form in the appropriate block. No deletions or additions of
timber sales are permitted to an ILOC/Blanket Payment Bond without amending or
reissuing the ILOC.
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82.33 - Exhibit 01
SEE THE PAPER COPY OF THE MASTER SET
FOR SECTION 82.33 - EXHIBIT 01.
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82.33 - Exhibit 02
(Printed Letterhead)
(Name of Issuing Bank)
(City, State and Zip Code)
Month DD, 19XX
USDA Forest Service
XXXX National Forest
PO Box YYYY
Heaven, CO 99999
Gentlemen:
We hereby establish an irrevocable letter-of -credit in your favor, at the request of,
and for, the account of
(Name of principal)
in the aggregate amount not to
exceed One Hundred Thousand Dollars ($100,000) to secure the payment on the
following timber sales:
Name of Sale
Death by Chocolate
Gettin' a Buzz
Blissful Oblivion
Forest Service
Contract Number
XX-99991
XX-99992
XX-99993
Said funds are available by presentation of sight drafts drawn in favor of the USDA
Forest Service. All drafts must be made "Drawn under Letter-of-Credit Number 13
(bank/institution name can be entered here also)."
This irrevocable letter-of-credit will expire on December 31, 19XX.
We hereby agree that drafts drawn under and in compliance with the terms of the
letter-of-credit will be duly honored on due presentation to
(Name of bank)
or
before the expiration date of this letter-of-credit.
Sincerely,
(Name of bank)
(Authorized signature and title)
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82.33 - Exhibit 03
SEE THE PAPER COPY OF THE MASTER SET
FOR SECTION 82.33 - EXHIBIT 03.
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82.33 - Exhibit 03--Continued
SEE THE PAPER COPY OF THE MASTER SET
FOR SECTION 82.33 - EXHIBIT 03.
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83.3 - Timber Sale Bonds.
2. Payment Bonds.
a. General Provisions. When a Purchaser furnishes an irrevocable letter
of credit as payment bond, the termination date must exceed the last day
of timber harvesting by a sufficient number of days to allow for billing
and payment. Usually this should be at least 30 calendar days.
(1) Blanket Payment Bond Provisions. When the Timber Purchaser
furnished a Blanket Payment Bond as payment guarantee for several
sales within an Administrative National Forest, the following procedures
will be used to insure appropriate financial coverage for timber cut but
not removed and for the value of timber removed from sale area for not
more than a monthly billing period.
(a) The Forest Service Representative (FSR) estimates the sale's financial coverage using the
Purchaser's Operating Schedule and current contract rates, for expected volumes to be cut in the next
30-60 days.
(b) The FSR then informs Purchaser of the needed financial coverage for the sale(s).
(c) The Timber Purchaser can then choose to: (1) reallocate under the blanket bond for all sales
involved, (2) make cash payments, (3) transfer available purchaser credit, (4) stop cutting, and/or (5)
increase the penal amount of the bond (obtaining an increase rider with Surety) with subsequent
reallocation to appropriate sales.
(d) Upon approval of the Purchaser's proposed financial coverage, the Bond Approving Officer
(Contracting Officer) then submits the Purchaser's approved allocation request (with Increase Rider)
to Forest TSA Coordinator for ATSA data-entry.
(e) Upon ATSA monthend closure, the Bond Approving Officer sends copies of the monthly ATSA
Blanket Guarantee Coverage Report, to the Purchaser, Surety, and FSR. (This report summarizes the
allocations made to all contracts contained on the Blanket Payment Bond - Reference FSH 6509.17,
Chapter 30).
83.4 - Reclamation Bonds. Region-wide or Forest-wide reclamation bonds shall be
accepted for reclamation work. Operators desiring a reclamation bond to cover their
activities on a Forest, or throughout the Rocky Mountain Region, should be advised
of the blanket bonding procedure. The Forest shall establish a recordkeeping
system for blanket bonds on its Forest. Forests and Districts which are contacted
by firms who wish to do mineral or exploration work on National Forest System
land should determine whether the proposed work involves more than one Forest.
If more than one Forest in the Region is to be involved, bonding activities must be
coordinated with Management Systems and Administration (MSA), Fiscal and
Public Safety (F&PS). Requests for Regional blanket bonds shall be sent to the
Assistant Director, MSA-F&PS. The amount of the Region/Forest bond shall be
determined jointly with the operator based upon the planned exploration activities.
Upon approval of an operator's Region/Forest blanket reclamation bond, the
following direction applies:
1. Units shall be notified that a Region/Forest blanket bond is available for the
operator by MSA-F&PS.
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2. Each project, for which the permit, lease or plan approval is contingent upon
a reclamation bond, must be bonded by a specific portion of the Region/Forest bond
prior to initiation of the project.
3. Bond amount for each project must be calculated based on the surface
disturbing activities described in the proposed operating plan and analysis of
reclamation cost. This analysis should be documented and made part of approved
operating plans. These calculations should be reviewed annually and the bond
amount adjusted to reflect any changes.
4. Request for bond allocations and allocation changes must be sent, under file
designation 6500, to the Forest Supervisor for Forest-wide bonds and to the
Assistant Director, MSA-F&PS, for Region-wide bonds.
These requests must contain the following:
a. Name and address of permittee/operator.
b. Name and location (legal, County/State) of project (Permit No. or
date).
c. Dates of allocation request and proposed initiation of work.
d. Amount of allocation request/change (if change, indicate reason, such
as reclamation cost recalculation due to plan revision of annual updating,
satisfactory reclamation upon completion of project, and so forth).
e. Surety name and address (bond No. or date executed).
5. Upon approval of the request by the Supervisor's Office for Forest-wide
bonds or by the Assistant Director, MSA-F&PS, for Region-wide bonds, an approved
allocation statement shall be sent the originating unit.
6. When the bond is no longer required, the units shall notify the
Region/Forest so the amount can be reallocated.
7. The Reclamation Evaluation Worksheet indicates that the bond estimate
is to include removal of exploration-related debris. An estimate of the cost of
removal of that debris shall be included in the Reclamation Evaluation Worksheet
and is made a condition of the operating permit. When an operator fails to remove
the debris, demand redemption of the entire bond from the surety. Send a copy of
the demand to the surety and to the operator. The purpose of this procedure is to
encourage the operator to clean up the site. Therefore, if they offer to clean up the
site, they should be permitted to do so provided the deadline does not extend into
subsequent field seasons. If live explosives are left on the site, Forest Service
personnel shall post the area and notify the State licensing authority. Forest
Service personnel should not attempt to move or detonate the explosives.