PACA Can Help Protect Your Company

Abbey Taylor VSCNews magazine

By Travis Hubbs

Since its foundation in 1930, the Perishable Agricultural Commodities Act (PACA) has been promoting fair trade practices in the fresh and frozen fruit and vegetable industry. In enforcing a code of fair business practices, the U.S. Department of Agriculture (USDA) resolved approximately 3,400 PACA claims involving more than $58 million in the past three years alone. PACA staff also assisted more than 8,500 callers with issues valued at approximately $151 million. These are recent examples of how USDA continues to level the playing field for vendors and growers. But it takes more than a rulebook to keep commerce flowing smoothly.

Working in partnership with the fruit and vegetable industry, PACA promotes fair trade practices through education, licensing, dispute resolution assistance and investigative enforcement. It also provides financial protection for industry members through the PACA Trust.

EDUCATION
PACA staff is ready and willing to assist businesses and answer questions through its customer service line at 800-495-7222. Additionally, information concerning PACA licensing, delivery guidelines, the PACA Trust, online training, and dispute resolution options are available on the PACA website at www.ams.usda.gov/paca.

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LICENSING
PACA requires businesses that buy or sell wholesale quantities (i.e., 2,000 lbs.) of fresh or frozen fruits and vegetables to have a license. This includes shippers, wholesalers, brokers, retailers, processors and many e-commerce firms. Farmers are not required to have a PACA license unless they purchase wholesale quantities of produce from another grower or company. However, growers often obtain a PACA license in order to benefit from the financial protection afforded to licensees under the PACA Trust.

DISPUTE RESOLUTION SERVICES
The PACA Division provides industry members with a forum to settle commercial disputes. These creative options serve as an alternative to traditional legal proceedings, which are often time-consuming and expensive. Industry members are provided with alternatives such as filing informal complaints and/or participating in mediation facilitated by PACA staff.

ENFORCEMENT
Additionally, the PACA Division provides investigative enforcement to promote compliance through administrative actions against firms or individuals who are not trading fairly, and by stimulating payment of past-due produce debt back to the industry when circumstances permit. Licensees who violate the PACA may have their license suspended or revoked, and individuals determined to be responsibly connected to such licensees are restricted from being employed or operating in the produce industry for a set period of time.

PACA TRUST
Established in 1984, the PACA Trust affords sellers with financial protection if a customer declares bankruptcy or insolvency. Trust provisions place sellers of fresh and frozen fruits and vegetables into priority status when their buyers experience business failure or file for bankruptcy protection. When a supplier sells produce to a buyer, the supplier, whether licensed or not, becomes eligible to participate in the PACA Trust. In the case of a business failure or bankruptcy, the debtor’s trust assets are not available for general distribution to other creditors until all valid trust claims have been satisfied.

To preserve trust rights, it is important to know that payment terms must not exceed 30 days, and the necessary trust language must be conveyed to the customer. Anyone with a PACA license can conveniently place the official PACA Trust paragraph on the bottom of all invoices, which will preserve the seller’s rights on every transaction. Sellers not licensed under the PACA, or licensees who do not include the statutory wording on invoices, must provide written notice to their customers conveying their notice of intent to preserve PACA Trust benefits on that particular transaction.

Since its inception, hundreds of millions of dollars have been paid to qualified produce creditors under the PACA Trust provision. In case of a buyer’s insolvency, the PACA Trust protects growers as secured creditors by providing legal protection in a suit and a means for recovery of damages.

CONTACT PACA
PACA experts are ready to assist companies with problems unique to the industry, such as interpretation of inspection certificates, advice on contract disputes and bankruptcy issues. Representatives are available Monday through Friday from 7:00 a.m. until 7:00 p.m. Eastern Standard Time to provide information and respond to questions. Call 800-496-7222 and select option 2.

Travis Hubbs is chief of the Investigative Enforcement Branch of the Perishable Agricultural Commodities Act Division of the U.S. Department of Agriculture.

This article was featured in the October issue of VSCNews magazine. To receive future issues of VSCNews magazine, click here.

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