The PACA trust provisions put sellers of fresh and frozen fruits and vegetables in a priority status in the event their buyers become insolvent or file for bankruptcy protection.
When a supplier sells produce to a buyer, the supplier becomes eligible to participate in the trust. The PACA trust provisions require that buyers maintain a statutory trust on fruits and vegetables received but not yet paid for. 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. Because of this, suppliers that file for trust protection have a far greater chance of recovering money owed them when a buyer goes out of business.
United States District Courts have jurisdiction over actions by trust beneficiaries to enforce payment from the trust; and, actions by the Secretary of Agriculture to prevent and restrain dissipation of the trust. (“Dissipation means any act or failure to act that could result in the diversion of trust assets, or that could prejudice or impair the ability of unpaid produce suppliers, sellers, or agents to recover money owed in connection with produce transactions.”)